Shortfall fears for over 1m interest only mortgage holders

CLAPTON

TruckerT wrote: »

Politicians are clueless about how to create growth full stop!

Some might say that it is time to stop worrying about growth, and concentrate on preserving our habitat.

TruckerT

It's absolutely marvellous that you have finally realised that politicians have no idea about creating wealth;

indeed it is the private sector that creates wealth.

CLAPTON

Thrugelmir wrote: »

As goes debt. As you never have work harder to pay it back.

Hence why politicians are desperate for growth driven by debt. As they are clueless as to how to actually create growth without it.

Many of our major companies started in debt and grew funded by debt and now are cash rich successful companies employing millions.

Indeed many people lament that small companies can't get funding (i.e. debt) to allow them to invest and grow.

Thrugelmir

CLAPTON wrote: »

Many of our major companies started in debt and grew funded by debt and now are cash rich successful companies employing millions.

We don't own them.

TruckerT

CLAPTON wrote: »

It's absolutely marvellous that you have finally realised that politicians have no idea about creating wealth

Politicians have proved themselves very good at creating wealth. Unfortunately most of it has gone to the banks. Politicians have shown less skill at generating economic growth for the country at large.

TruckerT

CLAPTON

Thrugelmir wrote: »

We don't own them.

Well many people's pensions are dependant upon then, our tax income comes from them, many people salaries are paid by them and some of us directly own shares in them.

I feel we can reasonably use the word 'our' and I would prefer they were based here rather than elsewhere.

CLAPTON

TruckerT wrote: »

Politicians have proved themselves very good at creating wealth. Unfortunately most of it has gone to the banks. Politicians have shown less skill at generating economic growth for the country at large.

TruckerT

as most banks are actually insolvent that seems unlikely

BobQ

Endowment mortgages were another of the cons perpetrated on ordinary people by the financial services industry. Pre-regulation the financial advisors could get away with whatever they liked. Endowment mortgages with interest free loans were ideal products for devious sales people.

People must be quite naïve to have continued to rely on these policies to repay their loans.

OffGridLiving

Thrugelmir wrote: »

Peak of the lending boom was 2003-2008. This is the period where the problem lies. As many people's disposable incomes have seen no improvement since then. It's low interest rates which are keeping the heavily indebted afloat. Every year through to around 2031. The average interest only mortgage heading for redemption grows ever larger. So difficult to see the exit route for a high %.

First time buyers buying in 2003 would have 15 years to sort themselves out. That's a very reasonable time frame to sort out personal finances.

It's very unlikely that they would remain in the same house for those 25 years and so when they move to their next home, typically afer 5 to 7 years they will be compelled to finance it with a repayment mortgage. For those who can't afford to move house because a repayment mortgage would be too expensive, they will have to stay put and either increase their savings or decrease their mortgage balance, just as they would if they were in negative equity. They would have at least 15 years to do this. The other option would be to buy a home they could afford on repayment.

It's even more unlikely that they would remain on the same mortgage deal for those 25 years and so when they remortgage, they will be compelled to finance it with a repayment. For those who cannot afford to move their mortgages to repayment will have to stay on SVR and either increase their savings or reduce their mortgage balance. In the unlikely event that they spend the next 15 years unable to save a penny, then towards the end of their mortgage term they will have to sell their houses and rent.

Those people who mismanage their finances will get in to financial difficulties, just as they always have. Everyone else will adapt and move on. I honestly don't see any sort of timebomb now that interest only mortgages have been withdrawn.

Graham_Devon

OffGridLiving wrote: »

First time buyers buying in 2003 would have 15 years to sort themselves out. That's a very reasonable time frame to sort out personal finances.

It's very unlikely that they would remain in the same house for those 25 years

I've removed the rest of your quote, simply because I wanted to highlight this.

Can you see the issue with what you have posted?

This is something I was trying to put across on the other thread about windfalls. It's OK suggesting the term runs for 25 years, but how many people stay in the same one house for 25 years and finish paying down their mortgage? The absolute minority.

All these calculations and theories simply don't match reality. As laid out above in the start of your post.

They have 15 years to sort it, but straight away you have said they are unlikely to stay there for another 15 years. Therefore, they haven't got 15 years at all. If they ever want to move....as most people do, they have to sort it out much quicker or they become trapped. Being trapped and having no choice is no solution.

Thrugelmir

OffGridLiving wrote: »

First time buyers buying in 2003 would have 15 years to sort themselves out. That's a very reasonable time frame to sort out personal finances.

It's very unlikely that they would remain in the same house for those 25 years and so when they move to their next home, typically afer 5 to 7 years they will be compelled to finance it with a repayment mortgage. For those who can't afford to move house because a repayment mortgage would be too expensive, they will have to stay put and either increase their savings or decrease their mortgage balance, just as they would if they were in negative equity. They would have at least 15 years to do this. The other option would be to buy a home they could afford on repayment.

It's even more unlikely that they would remain on the same mortgage deal for those 25 years and so when they remortgage, they will be compelled to finance it with a repayment. For those who cannot afford to move their mortgages to repayment will have to stay on SVR and either increase their savings or reduce their mortgage balance. In the unlikely event that they spend the next 15 years unable to save a penny, then towards the end of their mortgage term they will have to sell their houses and rent.

Those people who mismanage their finances will get in to financial difficulties, just as they always have. Everyone else will adapt and move on. I honestly don't see any sort of timebomb now that interest only mortgages have been withdrawn.

You are starting from the base point that these borrowers were suitable to be advanced thousands of pounds at the outset. That's where we differ in view. Many weren't. The remaining mortgages in NRAM are a testament to that fact.