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FCA: Interest-only mortgage crackdown "gone too far"
Comments
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marathonic wrote: »
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.
Not that I care about official figures, but my argument is ... if it wasn't for the low monthly payment of an IO mortgage, more people would be struggling.
And the fact remains... the vast majority of people who take out an IO mortgage do so because they otherwise couldn't move into the house they like.
They were a major driving force of HPI during the last boom.
(and the one before, as it happens)
Again, this is 100% fact.0 -
marathonic wrote: »I'm advocating the availabilty of I/O mortgages using even stricter underwriting criteria than repayment mortgages.
Stricter underwriting means little. As over 25 years anything can happen. From a lenders perspective not worth the bother. As the administration cost over the term of the mortgage would need to be reflected in a higher interest charge. Thereby making the product less attractive.0 -
Thrugelmir wrote: »From a lenders perspective not worth the bother. As the administration cost over the term of the mortgage would need to be reflected in a higher interest charge. Thereby making the product less attractive.
If people are desperate they will pay the price. If people are clever and want to play the market why shouldn't the lender take a cut to cover costs?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »If people are desperate they will pay the price. If people are clever and want to play the market why shouldn't the lender take a cut to cover costs?
Put yourself in the lenders shoes. Why bother?
Demand for mortgages exceeds supply.
Lenders need to reduce their total lending, to comply with higher capital requirements.
Tougher FSA rules place the onus on banks to ensure an individual borrower can repay a mortgage.
Given that interest only mortgages already number in the millions. There's plenty of resolving to do clearing the historic issues that are yet to crystalise.
Most debate always takes the view of ground up i.e. micro. Whereas banks look top down from the macro perspective. Which is totally different.0 -
Thrugelmir wrote: »Put yourself in the lenders shoes. Why bother?
Demand for mortgages exceeds supply.
Lenders need to reduce their total lending, to comply with higher capital requirements.
Tougher FSA rules place the onus on banks to ensure an individual borrower can repay a mortgage.
Given that interest only mortgages already number in the millions. There's plenty of resolving to do clearing the historic issues that are yet to crystalise.
Most debate always takes the view of ground up i.e. micro. Whereas banks look top down from the macro perspective. Which is totally different.
I agree with you but there will always be a market at the right price."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »I agree with you but there will always be a market at the right price.
HSBC will offer you an interest only mortgage if your annual income is in excess of £100k. So there's nich products in the market. Mass market has little to no appeal.0 -
Thrugelmir wrote: »Demand for mortgages exceeds supply.
Yes.
Some of us have been banging on about this for quite some time now.“The great enemy of the truth is very often not the lie – deliberate, contrived, and dishonest – but the myth, persistent, persuasive, and unrealistic.
Belief in myths allows the comfort of opinion without the discomfort of thought.”
-- President John F. Kennedy”0 -
.. including those who bought it and others in cap-weighted index trackers. But lots of people seem to think they are magic. Not my preferred index weighting, by far.Thrugelmir wrote: »All those investors who bought Lastminute.com...........:eek:
Please provide the link to the authoritative data source that supports that claim. I don't think it's really credible given the size of the interest only market in the past, 80% of all mortgages at some points. The FSA Mortgage Market Review provided some data on this subject, perhaps you are using that, if so please give the specific citation. Or maybe it's just your own opinion without authoritative data behind it?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.
I don't agree that the houses haven't been bought. Just ask the ones who got into negative equity and suffered the capital loss even while they were paying their mortgage. You don't get that capital loss unless you're the owner.
It's harder to do that and survive until you reach 55 if you are in your 30s. In your 40s I managed to accumulate enough to live until 55 and after in under 7 years from a zero start, with lots of commitment and a fairly good wage. Still not easy, but more doable.This is a fat lot of use if you lose your job in your 30s or 40s.
To do it before 55 takes a mixture of pension and non-pension money.
If we were discussing only mortgages taken out by 20 year olds, or maybe those up to age 30, then maybe a pension wouldn't be suitable because 55 is more than 25 years away. Any older and some use of a pension is possible. Younger and S&S ISA is possible.
The person with investments has an income and if they are like me they won't qualify for means tested benefits because their income is too high while living off those investments.In what way is this person worse off than somebody who has put an equivalent amount of money into increasing their pension rather than overpaying their mortgage? Surely the person who took the pension option has the same inability to borrow more, the same means tested benefits, and the likelihood that the emergency fund will run out faster because the mortgage payments are higher.
Until reaching that point, the pension is safe against bankruptcy, while the property may not be.
I don't limit the discussion to only using a pension. But even if we restrict it to those with a pension for income, that just means that we'd be covering the part of the market for borrowers aged 55 and older, which exists.The person who has put their money into their pension has no more to live off now than the person who's overpaid their mortgage, assuming both are under 55.
The tax relief is useful but the big deal is the investment returns. Though for me, I'm now old enough that having access to pension money is in my medium term planning range, not distant future, so that pot of money is much more tangible than for say a 20 or 30 year old.I think perhaps part of the reason why I don't see pension as being as important as you do is because I'm a basic rate taxpayer. So for me, putting money into a pension doesn't mean getting tax relief now at a higher rate than the money will be taxed at in retirement, as it does for you.
For a basic rate tax payer a salary sacrifice pension scheme can come quite close to higher rate benefits outside one (or even inside). But you're right that the gain is less.
About 32% of my own pension contributions were at basic rate, though with the NI benefit of salary sacrifice. Though I'm fortunate that for the last four years I'm earning more and get higher rate relief instead. That also means I'm now in the higher part of the population earnings, something that's hugely different from most of my adult life, when living on minimum wage or benefit levels or not far above that was more common.
That's a good plan, I think.My strategy is to put as much as I am allowed to into the defined benefit scheme that I'm eligible for (teachers') and put the rest of my money where I can get at it if I need it. As a single parent, I value the flexibility.
Good that you do, but not really so efficient for those with a choice between mortgage or overpaying. But investing has risk and some people just don't like that risk. Such is the variation of life and people's views and comfort levels.(I own my house outright, and although I have a mutually beneficial arrangement with my dad that he lent me the money to fund my house purchase at a higher rate of interest than he was getting on his savings, I have a near certainty of getting a lump sum in the next few years that will enable me to pay that off. If my circumstances were more conventional, though, I'd probably get an offset mortgage and shove as much money into the offset as possible.)0 -
Thrugelmir wrote: »Put yourself in the lenders shoes. Why bother?
Demand for mortgages exceeds supply.
it does seem so strange that given the mismatch in supply and demand the price (interest rate) is dropping rather than rising.0 -
it does seem so strange that given the mismatch in supply and demand the price (interest rate) is dropping rather than rising.
Government intervention?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0
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