My retired mothers interest only mortgage expired - please help! :(

lonestarfan

Simon_gloster wrote: »

I agree, a 40 year term is absolute c@@p Holly for someone in their 50's onwards. I'd like to be proven wrong with evidence but feel I'll be drawing my pension before tangible proof is in my face.

Can someone please explain why is this sooooo awful? Why is it so awful to have a long term interest only and to take it into retirement & just sell the house on death?
Why have people got such a downer on interest only long term? I really don't understand why its so wrong. I'm interested to know

lonestarfan

Dave_the_Ginger_Cat wrote: »

From a lender's perpsective I cannot imagine anyone being keen to lend 30 years interest only at all, let along well into retirement,


Dtgc - I wish I could quote more than one post at a time but I don't know how to do it!:)

I'm interested in your opinion on why - if someone can afford it into retirement what is so wrong about 30 yr interest only into retirement? Thanks.

holly_hobby

Because since the recent FSA (now FCA) report, interest only wout any repayment vehicle is frowned upon (indeed a number of lenders have now withdrawn completely from interest only lending), and you've seen the "interest only timebomb" headlines being bandied about in the press..

I don't particularly subscribe to this, as I don't think every IO borrower is ignorant of the fact that if they have no capital to repay at term end, they'll have to sell .... I mean its pretty straightforward.

On top of this you have max ages at redemption, which in the main is now 75 yrs, although there are a smalll no of smaller lenders whom don't have an upper age limit (affordability permitting), and also offer IO BUT with the requirement of a repayment vehicle (unless super low LTV where they may consider sale at term end, or death if earlier).

So in essence, there's nothing wrong with what you are saying (indeed as I say YBS did offer such a scheme IO with no upper age restriction or repayment vehicle,but that was several yrs ago). The main problem is that current lending criteria doesn't permit this arrangement (save equity release lifetime mges of course which are only repayable on entry into long term care or death) - although FCA is softening up on the original FSA guidance notes.

Hope this helps

Holly

PS - come back to give gen info

lonestarfan

holly_hobby wrote: »

Because since the recent FSA (now FCA) report, interest only wout any repayment vehicle is frowned upon (indeed a number of lenders have now withdrawn completely from interest only lending), and you've seen the "interest only timebomb" headlines being bandied about in the press..

I don't particularly subscribe to this, as I don't think every IO borrower is ignorant of the fact that if they have no capital to repay at term end, they'll have to sell .... I mean its pretty straightforward.

On top of this you have max ages at redemption, which in the main is now 75 yrs, although there are a smalll no of smaller lenders whom don't have an upper age limit (affordability permitting)i, and also offer IO BUT with the requirement of a repayment vehicle (unless super low LTV where they may consider sale at term end, or death if earlier).

So in essence, there's nothing wrong with what you are saying (indeed as I say YBS did offer such a scheme IO with no upper age restriction or repayment vehicle,but that was several yrs ago). The main problem is that current lending criteria doesn't permit this arrangement (save equity release lifetime mges of course) - although FCA is softening up on the original FSA guidance notes.
Thanks Holly.


Hope this helps

Holly

Thanks Holly.
So current lending criteria doesn't allow it and the FCA frown upon it. So really its the FCA telling banking businesses how they run their business isn't it?
Why does the FSA frown upon it? What does the FCA see that I don't?
My own opinion is there's nothing wrong with interest only even without a repayment vehicle ( pay on death ) so I was trying to understand why its so bad.

holly_hobby

Sorry when I say current lending criteria, I dont mean the FCA say "you can't lend on this basis" - whom do recognise the principle that the responsibility of repaying the mortgage ulitmately lies with the consumer/mortgagor.

How I should have phrased it was, that IO lending without a suitable repayment vehicle no longer meets the individual criteria of most residential lenders, ie they no longer want the exposure and complications this type of business brings - essentially they have made a voluntary choice to opt out completely or restrict lending to this type of customer.

I remain hopeful that the reigns will loosen and some autonomy will return to the consumer - but as we currently stand such arrangements (of a true IO residental mge), are the exception rather than the norm - and I don't see them returning in their original format in the short term. (incidentally the FSA hitting the IO panic button, didn't affect BTL market (where true IO remains available), as this is unregulated business).

Hope this helps

Holly

PS - FSA = Financial Services Authority which are now defunct and replaced by the Financial Conduct Authority (FCA)

macman

lonestarfan wrote: »

Can someone please explain why is this sooooo awful? Why is it so awful to have a long term interest only and to take it into retirement & just sell the house on death?
Why have people got such a downer on interest only long term? I really don't understand why its so wrong. I'm interested to know

Because most people in their 60's don't want the prospect of paying a variable (and unforseeable) mortgage rate into their 90's, when they are no longer working and are living on a fixed retirement income.
What happens if the mortgage rate rises to 15% (we've been there not so many years ago, remember?) in 2023 and the OP's mum is facing monthly repayments of £1,000, rather than £300?

Cornucopia

Long-term fixed rate?

holly_hobby

Oh by the way TLOR .... regarding your argument that all lenders automatically agree to a CTL on request, and my comments that a lender may refuse such an application, being cited by you as apparently completely inaccuate, is somewhat clarified by a new posting ...

Where the OPs CTL appliction has you guessed it .... been refused ..

https://forums.moneysavingexpert.com/discussion/4593089

Holly

Thrugelmir

lonestarfan wrote: »

My own opinion is there's nothing wrong with interest only even without a repayment vehicle ( pay on death ) so I was trying to understand why its so bad.

From a business perspective simply too much hassle. Mortgage lending is high volume, low margin business. There's not the profit margin to micro manage hundreds of thousands of individual mortgages. Far easier and cost effective to lend the money on a repayment basis. As is the case with most other forms of loan.

In addition to which lenders need to reduce to the size of their mortgage books in the future. As there's not the funding to maintain them at current levels.

lonestarfan

Thrugelmir wrote: »

In addition to which lenders need to reduce to the size of their mortgage books in the future. As there's not the funding to maintain them at current levels.

That's interesting. How are you aware they need to reduce the book & that theres not the funding? Is it basic economics or related to the credit crunch or has it been reported on etc? Thnx.