FCA: Interest-only mortgage crackdown "gone too far"

marathonic

Thrugelmir wrote: »

All those investors who bought Lastminute.com...........:eek:

I see that. Thank god my Fidelity ISA has online access to allow me to pull any investment out of the FTSE All-Share because some people lost money investing in an individual stock in the early part of the last decade. I hadn't realised that investing was so risky

By the way, the current yield of the FTSE 100 is 3.3% and the expected increase in payouts (not yield because the index value will fluctuate) is 11% for 2013 - this, of course, varies depending on what analyst you choose to believe.

The yield at the peak in 1999 was 2.04%. Of course, that's only one aspect of the return and, although dividends can be cut, the current payout ratio can serve as a good guideline as to how comfortable the underlying companies are with regards to expected future profitability.

neverdespairgirl

dryhat wrote: »

IO mortgages are not the preserve of "savvy investors"

They are taken out by people who could not otherwise afford to buy a house/flat.

100% guaranteed.

We have an I/O mortgage, taken out less than 2 years ago.

It suits us as we are self-employed, so don't have £x coming in a month.

marathonic

neverdespairgirl wrote: »

We have an I/O mortgage, taken out less than 2 years ago.

It suits us as we are self-employed, so don't have £x coming in a month.

Exactly. It's similar to many people taking out 35-year mortgages with absolutely no intention of having the mortgage for 35 years.

As stated in a previous post in this thread, people have difficulty changing terms of a mortgage when they become unemployed. The banks are most likely to approve you for financial products when you need them least - as you represent less risk.

With the above in mind, it is very prudent to have contractual payments as low as you can possibly get, via an I/O mortgage or very long term. That way, you can overpay as you see fit and don't have to go knocking on the banks door looking for changes in terms if you become unemployed.

I wouldn't pay any attention to dryhats posts - well, not in relation to this matter anyway. He may be knowledgeable in other areas but his posts here didn't really inspire me to go checking out what other pearls of wisdom he has.

marathonic

One further point with regards to the argument related to the 1999 peak - is it outside the realms of posibility that the 1999 peak was a blip.

Was it a bubble considering P/E ratios in excess of 40, compared to a current P/E below 14? Was it a good place for income investors to be given the dividend yield of 2.04% versus the current 3.3%?

Given your answers to the above question, should the 1999 peak be ignored?

I know that identifying these bubbles is difficult. However, were I to invest in ISA's as opposed to pay down my mortgage, I'd like to think that I'd end up getting out of the market if I saw P/E ratios exceeding 25-30 - or at least partially out. At that point, I'd pay large chunks off my mortgage.

I know that timing the market is a fools game but this isn't so much timing the market as forming an opinion that, at the current P/E ratio, you think that the market is overvalued and you have already made significant gains. Of course, the market could go on to see P/E's of 40 but that would be irrelevant.

dryhat

neverdespairgirl wrote: »

We have an I/O mortgage, taken out less than 2 years ago.

It suits us as we are self-employed, so don't have £x coming in a month.

... and they say only low-life renters have trouble budgeting.


The fact remains ... the vast majotiry of IO mortgages are taken out by people who would not otherwise be able to afford to move into the house they like.

(note I didn't say "buy" the house they like)

marathonic

dryhat wrote: »

... and they say only low-life renters have trouble budgeting.

Who said anything about trouble budgeting? Taking on the minimal contractually obligated payments with the ability to overpay is the best course of action for those with variable monthly income.

Just because they have an I/O mortgage, doesn't mean that they're not planning to pay down capital - and possibly a lot quicker than someone on a repayment mortgage.....

dryhat

The fact remains ... the vast majotiry of IO mortgages are taken out by people who would not otherwise be able to afford to move into the house they like.

100% guaranteed fact.

marathonic

dryhat wrote: »

The fact remains ... the vast majotiry of IO mortgages are taken out by people who would not otherwise be able to afford to move into the house they like.

100% guaranteed fact.

Not at present - given the mass withdrawal of I/O mortgages from the market.

To be honest, your stubborness on a topic regarding which you, obviously, have no knowledge about astounds me.

I'm advocating the availabilty of I/O mortgages using even stricter underwriting criteria than repayment mortgages.

Just because your own circumstances may render such a product outside your grasp, doesn't necessarily mean it's a niche product - there are many people that would meet lending criteria vastly more restricted than what's currently evident in the mortgage market.

dryhat wrote: »

The only reason people take out an IO mortgage is not because they are "savvy", it's because otherwise they could not "afford" the house they are "buying".

Combined with liar loans, this is why house prices boomed during the last decade.

It's as simple as that.


Anyone who thinks otherwse is an idiot and not worth arguing with.

I see that, having being proven wrong, you've backtracked from this argument to say that it's not everyone - but the vast majority. Perhaps, in time, we can talk some sense into you.

Keep an open mind and don't make statements like '100% guaranteed' about topics when you could easily be proven wrong - it just makes you look stupid.

dryhat

marathonic wrote: »

Just because your own circumstances may render such a product outside your grasp, doesn't necessarily mean it's a niche product -

Thank you.

That is my point... it's not a "niche product" used by "savvy investors"

Ignoring BTL at this point; on the residential side the vast majority are taken out (or were taken out) by people who could not otherwise afford to move into a house they liked.

This is 100% fact.

marathonic

dryhat wrote: »

Thank you.

That is my point... it's not a "niche product" used by "savvy investors"

Ignoring BTL at this point; on the residential side the vast majority are taken out (or were taken out) by people who could not otherwise afford to move into a house they liked.

This is 100% fact.

For the I/O mortgages of the past, and ALL mortgages for that matter, you are possibly correct. There's no way of proving whether it is 100% fact or not because the banks don't release information about the financial standing of the I/O mortgage holders.

The only publicly available information with regards to residential mortgages is the arrears information - and, based on this information, you still appear to be incorrect. The majority of people on IO mortgages appear to be keeping up with payments.

You could say the same about I/O mortgages, high-LTV mortgages, high-salary multiple mortgages, etc.

Are you in agreement that the availabilty of a mass-market I/O mortgage is a good idea provided the underwriting criteria was as strict, if not stricter, than repayment mortgages?