Person of Interest Only

Eellogofusciouhipoppokunu

Despite all the rhetoric on here that it was impossible, I took out an IO mortgage just under three years ago at 5x salary. I contacted my mortgage lender (Santander) recently to see how I stood because of all the continued rhetoric on here and in the press, and was told that there is no problem at all for existing customers and that the restrictions were for new borrowers.

Santander have a 2 year fixed rate at 2.39%, which is lower than my current 2.54% deal and allows me to remain on IO. Seems like it's 'business as usual' for most people.

grizzly1911

Loughton_Monkey wrote: »

Personally, I'm not complaining though. I bought 7 conventional with profits endowments. Respectively, they delivered the following multiples of the desired maturity value: 3.77,2.65,2.45,2.02,1.5,1.4,1.23

The key words being conventional with profits endowment.

More expensive (slightly) than a straight 25 year repayment for a healthy bod.

They generally did return more than the desired maturity value leaving you with a a surplus after repayment.

Then came thee ubiquitous unit linked products, transferring the risks to the punter, much more profitable for the life company that usually failed to make the promised return. Admittedly they were generally cheaper than the equivalent, with profits, policy at the outset.

Quite often both were assigned to the lender who monitored the performance of the policies and wouldn't allow draw down without the policy in place.Common sense really.

I have no sympathy for I/O borrowers they took the risk and played the field.

Eellogofusciouhipoppokunu

Graham_Devon wrote: »

Isn't the underlying picture here exactly what many suggested interest only (in the main) was used for?

The bigger the percentage in the area of IO loan, generally the more expensive the area....suggesting people took IO as a way of affording the monthly payments.

Depends on whether you believe that wealthy people live in wealthier locations and that wealthy people got wealthy by managing their money better. If you believe that, then you can rightly assume that these wealthy people would prefer an IO mortgage because they are more flexible than repayments.

Of course some people believe that wealthy areas are populated by poor people with overstretched finances and that they are poor because they don't know how to balance a checkbook and that they have an IO mortgage because they can't really afford to live in a wealthy area. There is no arguing with these people.

Graham_Devon

Eellogofusciouhipoppokunu wrote: »

Depends on whether you believe that wealthy people live in wealthier locations and that wealthy people got wealthy by managing their money better. If you believe that, then you can rightly assume that these wealthy people would prefer an IO mortgage because they are more flexible than repayments.

Of course some people believe that wealthy areas are populated by poor people with overstretched finances and that they are poor because they don't know how to balance a checkbook and that they have an IO mortgage because they can't really afford to live in a wealthy area. There is no arguing with these people.

Statistics however, which I'd prefer to rely on, rather than my own belief formed from my own wants, do not show that, in the South West for example, at least 52% are wealthy people deciding to choose IO mortgages to manage their wealth.

Indeed, the IO LTV ratios don't correlate either with your wishes either.

Maybe that's why there is no arguing?

Edit: Love the dithering dad reference, BTW. Been a long time since we seen a reference to that banned username of yours

IveSeenTheLight

Graham_Devon wrote: »

Statistics however, which I'd prefer to rely on, rather than my own belief formed from my own wants, do not show that, in the South West for example, at least 52% are wealthy people deciding to choose IO mortgages to manage their wealth.

Indeed, the IO LTV ratios don't correlate either with your wishes either.

Maybe that's why there is no arguing?

I'm not sure what your referring to here.
Are you disputing the statistics and representation shown in post 1

It seems this grah DOES show 51.2% in the South West are NOT paying back the principal

[IMG]http://im.ft-static.com/content/images/bd772daa-26d9-11e2-9295-00144feabdc0.img?width=334&height=452&title=&desc=Proportion of home buyers not paying back principal[/IMG]

chewmylegoff

Eellogofusciouhipoppokunu wrote: »

Despite all the rhetoric on here that it was impossible, I took out an IO mortgage just under three years ago at 5x salary. I contacted my mortgage lender (Santander) recently to see how I stood because of all the continued rhetoric on here and in the press, and was told that there is no problem at all for existing customers and that the restrictions were for new borrowers.

Santander have a 2 year fixed rate at 2.39%, which is lower than my current 2.54% deal and allows me to remain on IO. Seems like it's 'business as usual' for most people.

Good to see that your famous interest rate gamble continues to pay off - I was getting worried as we hasn't heard about it for a while.

chewmylegoff

IveSeenTheLight wrote: »

I'm not sure what your referring to here.
Are you disputing the statistics and representation shown in post 1

It seems this grah DOES show 51.2% in the South West are NOT paying back the principal

[IMG]http://im.ft-static.com/content/images/bd772daa-26d9-11e2-9295-00144feabdc0.img?width=334&height=452&title=&desc=Proportion of home buyers not paying back principal[/IMG]

He is pointing out that not all interest only mortgages are taken out by rich people who could afford a repayment mortgage but choose IO as a way of managing their wealth. I.e. many of them will have taken out IO with no repayment vehicle as a gamble that prices would rise (and cos it's the only way they could afford to buy).

IveSeenTheLight

chewmylegoff wrote: »

He is pointing out that not all interest only mortgages are taken out by rich people who could afford a repayment mortgage but choose IO as a way of managing their wealth. I.e. many of them will have taken out IO with no repayment vehicle as a gamble that prices would rise (and cos it's the only way they could afford to buy).

It'll be interesting.
I used to have repayment BTL's, but with the low interest rates, I switched to IO to capitalise on the money working better elsewhere.

When rates rise (may be some time yet), I'll likely switch back to repayment.

It's a lot to do with risk and how risk averse you may be.

chewmylegoff

IveSeenTheLight wrote: »

It'll be interesting.
I used to have repayment BTL's, but with the low interest rates, I switched to IO to capitalise on the money working better elsewhere.

When rates rise (may be some time yet), I'll likely switch back to repayment.

It's a lot to do with risk and how risk averse you may be.

it is for some, but i doubt it is a coincidence that, according to that map, the % of people with IO mortgages appears to increase with house prices (and also with the places which were going up the quickest in the years immediately before the financial crisis).

C_Mababejive

I hadn't realised the scale of the interest only/no repayment vehicle market. I thought it was much smaller.I wonder what a suitable vehicle might be? A lump sum from a pension? A funds isa? A portfolio of shares? Surely you could have the vehicle at point of application then just liquidate all or most of it?