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

HAMISH_MCTAVISH

Graham_Devon wrote: »

Why do you want so much money put into lending?

It's a simple question. How does it effect you? You don't have kids that want to buy, so it's not that. You don't need lending, so it can't be that. So why, when you have A) no desire to borrow and no desire to see family borrow does it bother you so much that people are finding it harder to borrow?

Why would you want the taxpayer on the hook considering your position?

It affects us all Graham, whether or not we need to borrow, or whether or not we need to buy or sell.

An entire generation is being prevented from buying houses thanks to mortgage rationing, which is leading to the ongoing financial stagnation of the UK economy and continued high levels of unemployment, as despite your wish for it not to be the UK housing market and related products and services are (quite rightly) an important part of GDP.

So the ongoing dysfunction of mortgage markets results in us all suffering indirectly through a stagnating economy, and results in a significant minority of the population suffering directly.

But more importantly I object as credit availability is fundamentally a good thing for economies and society.

The expansion of credit availability is not the great evil some on here try and portray it to be, but rather the great equaliser, regardless of whether or not a minority choose to abuse it.

Only with access to credit and leverage can the ordinary man hope to compete with the existing holders/hoarders of capital, and avoid the consolidation of wealth in the hands of the few, rather than the many.

Limiting access to credit is a wholly regressive move, that can only end up in the inevitable reversion to a far more rentier society, that should have been consigned to the dustbin of history many decades ago.

Thrugelmir

marathonic wrote: »

is there any reason why the bank shouldn't lend to me on an I/O basis if I fully understood those risks?

Banks would end up paying compensation. Would be the bank taking the risk. While the customer gambles.

marathonic

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.

Well in that case, I'm an idiot and do not argue with me!!!! :rotfl:

I could afford my house and could have afforded and got mortgage approval for one 50% more expensive, yet I would have taken an I/O mortgage if it was available at the same rate as my current repayment mortgage.

I feel that money invested in an S&S ISA is likely to outperform the mortgage interest rate over the long-term. My plan would have been to maximize my S&S ISA annually. Eventually, my ISA would have been worth more than my mortgage balance and I could, if I so wished, repay the mortgage in full.

Not everyone fits into your little stereotypical pigeon holes......

And what's with all the quotes - are you trying to stress a point that obviously, in looking at my own predicament, is wrong in the first place?

Graham_Devon

HAMISH_MCTAVISH wrote: »

Only with access to credit and leverage can the ordinary man hope to compete with the existing holders/hoarders of capital, and avoid the consolidation of wealth in the hands of the few, rather than the many.

Well, I've edited out most of your post, as I simply don't agree with a word of it.

But the bit I quoted...it's yet more pyramid stuff. It's not the only way to compete either. The word "revolution" wouldn't even exist if it was. Not that I'm saying there is going to be one, but you could apply your stance to many power struggles in history and many have been overcome.

You don't really tell me why you want to see more credit...though it seems you believe its for the "greater good". Would this be correct?

(I have no idea how more credit for mortgages allows higher employment by the way).

grizzly1911

marathonic wrote: »

Yeah, I totally understand where you're coming from. But is there any reason that, like the current "you may lose your home if you do not keep up with repayments" warnings, they couldn't provide similar, but more serious warnings for I/O mortgages.

I'm just trying to determine how it might work in practice for those of us who are financially savvy. For example, say my plan was to pay off the mortgage with my pension lump sum. If the rules were to allow forced sale of the property, even if I was keeping up with repayments, upon retirement if my lump sum couldn't cover the mortgage, is there any reason why the bank shouldn't lend to me on an I/O basis if I fully understood those risks?

Perhaps such I/O mortgages are a good idea if they were only available through an IFA channel. That way, not only are the mortgages underwritten by the bank, but there would be repercussions for the IFA if they were to advise them for people who's overall financial situation made such mortgages considered a mis-sell.

If this were the case, an IFA would be able to view my current pension pot of 1.7 times my salary (given my large contributions during my twenties) and see me as a potentially viable case for such mortgages.

The bank could put a requirement in place that the IFA review the financial standing of the mortgage holder every five years and, without their approval, switch them to repayment.

Not simple stuff but there has to be a way that I/O mortgages could be available on the market and not give rise to similar issues as we've faced in the past.

Relying on a pension for all your needs at the end of the day is a lot riskier for the individual. Eggs and baskets spring to mind.

There would be additional costs for each review. Not sure an IFA should endorse the progress or be assessing debt risk. Gamekeepers and poachers.

Switching someone to repayment 10-15 years in isn't really going to help their position greatly and I am sure a forced sale would go down like a lead balloon if it when invoked.

As a specialist lending product there may be room for them or as a form of bridging finance where a specific known and quantified repayment method is established.

Thrugelmir

marathonic wrote: »

I feel that money invested in an S&S ISA is likely to outperform the mortgage interest rate over the long-term.

"Feel" is not a guaranteed return. Markets are like herds of buffalo. Are heading in the same direction. While stock markets are rising. Corporate profitability isn't. Like property. Those that exit at the right time will be the winners.

Graham_Devon

marathonic wrote: »

Well in that case, I'm an idiot and do not argue with me!!!! :rotfl:

I could afford my house and could have afforded and got mortgage approval for one 50% more expensive, yet I would have taken an I/O mortgage if it was available at the same rate as my current repayment mortgage.

I feel that money invested in an S&S ISA is likely to outperform the mortgage interest rate over the long-term. My plan would have been to maximize my S&S ISA annually. Eventually, my ISA would have been worth more than my mortgage balance and I could, if I so wished, repay the mortgage in full.

Not everyone fits into your little stereotypical pigeon holes......

And what's with all the quotes - are you trying to stress a point that obviously, in looking at my own predicament, is wrong in the first place?

You could still do all that with a repayment mortgage. You'd just have slightly less to invest each month. But nothing stopping you payig it off earlier.

On the plus side, you'd be sheltered from any external shocks in life which sees your plan knocked off kilter to a degree too.

marathonic

grizzly1911 wrote: »

Relying on a pension for all your needs at the end of the day is a lot riskier for the individual. Eggs and baskets spring to mind.

As long as the pension company itself is highly solvent and the pension assets are ringfenced off, as is the case with most companies, then I see no problem.

The 'all your eggs in one basket' doesn't really hold true. My pension can contain bonds, stocks, cash, property funds, etc. from a multitude of geographic regions and multiple sectors.

There are many people overpaying their mortgage and leaving very little room for manouevre in the rest of their budget. These people feel that this is financially savvy and, I have to admit, it's more financially savvy than spending all your earnings.

However, if I invest as much as possible into an ISA or Pension Plan whilst they pay down their mortgage, who is in the better position if lending criteria gets even stricter and we both lose or jobs for the long-term?

The person who has paid down their mortgage has a smaller mortgage and has to rely on benefits to pay down that mortgage and meet their cost of living. I have a larger mortgage but investments in Pensions (true, I cannot access these) and ISA's (which I can access). To me, paying down your mortgage frantically rings more true of 'putting all your eggs in the one basket'.

the_flying_pig

there's loads and loads of room for IO as a niche product and there are loads and loads of banks who still offer it as such.

that's all there is to say on the subject.

squealing for a return to the days when IO accounted for a third or so of all new mortgages is [or, as H says, perhaps a "happy medium" - maybe around a sixth of new mortgages should be IO?], well, it's literally pathetic. not just for the fact that it won't happen, more really when you stop to think for a moment what the suggestion would actually mine.

HAMISH_MCTAVISH

Graham_Devon wrote: »

But the bit I quoted...it's yet more pyramid stuff.

Just the opposite.

We've seen a million FTB-s locked out of buying thanks to mortgage rationing. And instead an extra million houses have been converted to rental.

Those potential FTB-s are now enriching their landlords.

Wealth is consolidating in the hands of the few, and not the many.

Credit is the great equaliser, which allows those without capital to compete on a more level playing field with the current holders of capital.

In the absence of sufficient credit, wealth and assets will consolidate in the hands of those with capital, because they have no competition from the masses..

As we have seen....

it seems you believe its for the "greater good". Would this be correct?

Yes.

(I have no idea how more credit for mortgages allows higher employment by the way).

45,000 posts on here and you still don't grasp the basics of economics.

Just.... wow.