MSE News: Interest-only mortgage market dries up as Coventry pulls plug

Thrugelmir

regbrown wrote: »

You do not seem able to handle the idea that all our situations are all unique,

And lenders cannot possibly cover all the bases. Lenders work on statistical data from their entire mortgage books to determine policy. The risk management team report directly to the lenders board of directors. Policy is then determined, and relayed to underwriters to implement.

If you want "I". Then you need to bank with Coutts or a similar organisation that offers personalised services.

jamesd

kingstreet wrote: »

Mortgage profs and HNWs are excluded, true, but for most of us it will apply.

Just use a non-interactive purchase process like internet or paper instead of face to face or telephone application.

Q32: Do you have any comments on our proposed approach, which allows consumers to opt-out of advice when purchasing products online or by post and allows them to purchase on an execution-only basis?
100. The majority of respondents generally supported our proposals to allow non-interactive sales to be undertaken on an execution-only basis.

Thrugelmir wrote: »

How can this be verified on a regular basis in an economic fashion?

The FSA requirement is to ask once during the term of the mortgage. No document or statement checking required. Once a year an email or letter to a customer saying "Please visit our web form to confirm that you have a repayment strategy in place. Thanks".

Thrugelmir wrote: »

So not really a relaxation of interest only. Given balance is repayment.

A 50% increase in the amount of mortgage that can be obtained and halving of the deposit requirement, a big deal. Not as nice as 75% interest only but still a welcome improvement.

Measures that don't force people to stay renting or move into rental accommodation after a change in relationship are welcomed by me. If the mortgage ends up failing all that happens is you end up where you would have been anyway, renting, but having had the potentially substantial cost and lifestyle benefits of owning for a while along the way.

LizB62

It does seem like they're not taking everything into consideration.

I've got a part and part mortgage (65% repayment, 35% IO) so that I can afford to live close to a good school.

My son and I have been here for 7 years, and when he leaves school in 4 years time, we'll move a few miles away where we can get about the same size house for two thirds of what our house cost.

So my "IO Repayment Plan" has always been to downsize.

I'm hoping that my 50% plus equity will still allow me to have some of my mortgage on IO when my fixed rate ends next year.....

Thrugelmir

LizB62 wrote: »

I'm hoping that my 50% plus equity will still allow me to have some of my mortgage on IO when my fixed rate ends next year.....

So your plan to repay the mortgage at the end of the term is ?

Not picking on you personally. However there is a considerable number of people in a similar situation already. So the problem is far from resolved.

regbrown

Thrugelmir wrote: »

So your plan to repay the mortgage at the end of the term is ?

Not picking on you personally. However there is a considerable number of people in a similar situation already. So the problem is far from resolved.

"So my "IO Repayment Plan" has always been to downsize."

When we signed up to our interest only mortgage we had to detail our plans for repayment. I would have no qualms with this being rigorously enforced and checked over a set time.

This plus larger deposit requirements (and honest advice) sounds like a better solution rather than just bin them all.

LizB62

Thrugelmir wrote: »

So your plan to repay the mortgage at the end of the term is ?

As already stated, my repayment plan is to move to a cheaper property once my son leaves school. That will enable me to pay off the 35% which is on IO and maybe even be mortgage free in the cheaper house

The point I was trying to make, although obviously didn't make it clear, is that there are people who have 100% IO, and there are others, like me, who have a much lower proportion on IO.

If my circumstances changed, I could sell my current house now, move somewhere cheaper now and have the smaller mortgage as 100% repayment. However, I choose to have some on IO so that, for a few years, I can live within a safe walking distance of a good school

Nikc_2

I just bought a new home with part repayment / part interest only. The plan is to repay loan that is at a higher rate first leaving the low rate loan until later. This makes financial sense and is not irresponsible.
I think banks should continue to offer this option, but people should receive some counselling first to ensure they understand the potential consequences.

kingstreet

Nikc wrote: »

I just bought a new home with part repayment / part interest only. The plan is to repay loan that is at a higher rate first leaving the low rate loan until later. This makes financial sense and is not irresponsible.
I think banks should continue to offer this option, but people should receive some counselling first to ensure they understand the potential consequences.

High rate, low rate?

Part and part is normally all at the same rate, it's the split between interest only and repayment which makes it part and part.

shortchanged_2

Basically the tide is turning. The days of people 'buying' houses they can't really afford are over.

People need to look at the flip side of the coin. When they say they could only afford to buy these properties with an IO mortgage have they ever considered that by taking out these said products they actually helped to push up house prices further thus further exacerbating the problem.

Along with liar loans, high income multiple mortgages and 100% plus mortgages, abuse of IO mortgages is what helped shaft the UK housing market.

none_such

a. What's the difference between taking an interest only mortgage and paying rent? The mortgage route is normally significantly cheaper and gives the option to attach a method of repayment as and when affordable;
b. With a repayment mortgage there if often an option to take the loan over 30 or 40 years, in which case there is very little if any capital repaid if the 'owner' moves house during that time.
c. If you rent a property you still end up not owning a house but have paid significantly more to a third party for the privilege.