whats going to happen in years to come with interest only mortgages?

neverdespairgirl

I think Graham's probably right in the above.

A fair few will have planned for it - and pay off the remaining mortgage with pension lump sums, ISAs, other investments, or out of pension income.

Some people will be quids in - they have a house in an area where prices have risen, or at least not fallen since 2008 much, and owned it long enough for the mortgage to be a small of the value - those types can sell (say) a large 4 bed house, and buy a smaller 2 bed house, or flat.

Some people will just about manage - pay it off via loans from their children, who will get it back in inherance. Some people might do the "lifetime mortgage" thing, where interest rolls up and is paid off on death.

Some people will find that they don't have enough left after a sale to buy anywhere suitable, and might have to spend the equity on rent until it runs out.

FWIW, I think interest-only mortgages can be high risk, and can be quite sensible. It all depends on the borrower, really. If I were a bank, I wouldn't do them at high LTV, though!

Graham_Devon

ukcarper wrote: »

I'm just providing figure to show it is unlikely someone would be in negative equity certainly don't think they are a good idea.

I'm not sure it will be as big a problem as some think because a large percentage of people will be able to re mortgage or will make arrangements before term ends.

I actually don't think it will be a problem at all.

Reason being, I believe if it does become a problem which starts hitting the headlines, as in people losing their homes, a scheme will be put in place to stop it happening.

Afterall, that's the response we have seen so far for pretty much everything housing related. I don't think with all the effort and money thrown at the market, the government of the day would let it be undermined by the issue of IO mortgage owners having to sell up or face repossession.

I guess it all depends on the economic background at the time though. I just think for anyonein this position, they'd be best sorting it now, at the risk of missing out on a government scheme. At least that way you are not sat in the boat with increasing numbers of other people all trying to sell you house for as much as possible to people who, with the best will in the world, want to, but can't afford your house.

For those who will have had the chance of making large amount of profit, having bought in say 1992-2000, time will be running out for them to deal with it. For the rest, there won't be that much HPI....certainly not enough to buy another place with and pay all the associated fees, so they will need a mortgage and will have to face up to paying more each month (due to repayment) for the privilege. They would just have a better deposit.

A 170k house bought in 2002 for instance may be worth £240k today. Take 10k out for fee's and you are left with £80,000. Which is lovely, but it certainly won't buy a suitable house (unless this was up north and your original house was massive to start with!), so you'll be starting over again, just with a nice deposit. Time (for 25 year mortgage purposes) may well not be on the side of these people. Let's face it, if these people could afford increased mortgage payments, they would have increased their payments on their original house and switched to repayment, they wouldn't be selling up.

It's certainly not all rosy. For many its certainly not going to cripple them. The best of the bunch having lived through massive HPI gains will have to be dealing with it now, leaving the rest.

rabbit_burrow

There's a claim company dealing with interest only mortgage mis-selling, I had a call a few weeks ago but I don't have one.

grizzly1911

Graham_Devon wrote: »

A 170k house bought in 2002 for instance may be worth £240k today. Take 10k out for fee's and you are left with £80,000. Which is lovely, but it certainly won't buy a house, so you'll be starting over again, just with a nice deposit. Time (for 25 year mortgage purposes) may well not be on the side of these people.

.

For those that took on IO what did they expect to happen, especially if they didn't put in place a repayment vehicle?

Did they expect the magic fairy to come in and write off any residual debt that HPI/inflation didn't overwhelm?

I don't wish to sound unfeeling but how did your parents expect it to unfold?

£9K does seem a lot but I have tended to work on about £20K, whilst looking for my MIL, by the time refurbishment, new carpets F&F are included.

ukcarper

Graham_Devon wrote: »

I actually don't think it will be a problem at all.

Reason being, I believe if it does become a problem which starts hitting the headlines, as in people losing their homes, a scheme will be put in place to stop it happening.

Afterall, that's the response we have seen so far for pretty much everything housing related. I don't think with all the effort and money thrown at the market, the government of the day would let it be undermined by the issue of IO mortgage owners having to sell up or face repossession.

I guess it all depends on the economic background at the time though. I just think for anyonein this position, they'd be best sorting it now, at the risk of missing out on a government scheme. At least that way you are not sat in the boat with increasing numbers of other people all trying to sell you house for as much as possible to people who, with the best will in the world, want to, but can't afford your house.

For those who will have had the chance of making large amount of profit, having bought in say 1992-2000, time will be running out for them to deal with it. For the rest, there won't be that much HPI....certainly not enough to buy another place with and pay all the associated fees, so they will need a mortgage and will have to face up to paying more each month (due to repayment) for the privilege. They would just have a better deposit.

A 170k house bought in 2002 for instance may be worth £240k today. Take 10k out for fee's and you are left with £80,000. Which is lovely, but it certainly won't buy a suitable house (unless this was up north and your original house was massive to start with!), so you'll be starting over again, just with a nice deposit. Time (for 25 year mortgage purposes) may well not be on the side of these people. Let's face it, if these people could afford increased mortgage payments, they would have increased their payments on their original house and switched to repayment, they wouldn't be selling up.

It's certainly not all rosy. For many its certainly not going to cripple them. The best of the bunch having lived through massive HPI gains will have to be dealing with it now, leaving the rest.

It wouldn't be difficult to devise a scheme to keep people in their homes without any cost to government whilst leaving banks still making money.

I think you show your true colours when you say any scheme implemented to stop people losing their homes is purely to prop up market.

I'm not sure people are still paying interest only because that's all they can afford.

chucknorris

rabbit_burrow wrote: »

There's a claim company dealing with interest only mortgage mis-selling, I had a call a few weeks ago but I don't have one.

Have you got their tel number? I need to call them, I've just found out that the mortgage lender expects me to pay these interest only loans back at the end of the mortgage term. I'm sure nobody mentioned this at the time I took the loans out!

Graham_Devon

grizzly1911 wrote: »

For those that took on IO what did they expect to happen, especially if they didn't put in place a repayment vehicle?

Did they expect the magic fairy to come in and write off any residual debt that HPI/inflation didn't overwhelm?

I don't wish to sound unfeeling but how did your parents expect it to unfold?

£9K does seem a lot but I have tended to work on about £20K, whilst looking for my MIL, by the time refurbishment, new carpets F&F are included.

My parent's expected to pay it off through promotion and an endowment. It didn't happen. It might have done, but a spanner in the works was my dads' health. They could have done it if he could have continued working, but it would have involved spending their later working years scrimping and saving every last penny.

My dad says they were sucked in to the sales pitch when applying. They actually applied for a repayment mortgage, but IO was sold as a much better alternative, alongside it, they had an endowment. So it wasn't as if they hadn't planned ont he repayment part. However, that endowment was around 60% off it's target when they sold up (i.e. 60% off where it should have been at the year they sold). It would have helped, but didn't do what it said on the tin.

They did sell 12 years before the mortgage ended, as they faced up to it.

That's why I say, it's OK projecting, calculation, but !!!!!! happens. How many others are in the non performing endowment boat after initially going for a repayment mortgage but being suckered in by the sales pitch?

Its one of the two biggest financial mistakes they ever made dad says. Both of them were caused by greed he admits. In this instance, the greed of being sold something which would allow them the freedom of extra disposable cash each month and an endowment that would end up profitable.

The other was buying a capri

Graham_Devon

ukcarper wrote: »

It wouldn't be difficult to devise a scheme to keep people in their homes without any cost to government whilst leaving banks still making money.

I think you show your true colours when you say any scheme implemented to stop people losing their homes is purely to prop up market.

I'm not sure people are still paying interest only because that's all they can afford.

I'm not sure why you are having a dig at me for "showing my true colours". I do wish you would stop all this.

Firstly I never said any scheme would be at "no cost". I fully expect it to cost.

Secondly, we already have such a scheme called SMI for those on repayment which does the very same thing in essence, that is, stop a reposession and costs us, the taxpayer. I can just see this being extended if the interest only issue undermined every other attempt made so far in the housing market.

ukcarper

Graham_Devon wrote: »

I'm not sure why you are having a dig at me for "showing my true colours". I do wish you would stop all this.

Firstly I never said any scheme would be at "no cost". I fully expect it to cost.

Secondly, we already have such a scheme called SMI for those on repayment which does the very same thing in essence, that is, stop a reposession and costs us, the taxpayer. I can just see this being extended if the interest only issue undermined every other attempt made so far in the housing market.

I might be wrong but you give the impression you would like to see people chucked out of their homes so that property prices crash and any move the government make is purely to prevent crash and has nothing to do with helping people.

Why would their be cost to tax payer they are paying interest now so why would they stop.

shortchanged_2

ukcarper wrote: »

I might be wrong but you give the impression you would like to see people chucked out of their homes so that property prices crash and any move the government make is purely to prevent crash and has nothing to do with helping people.

Why would their be cost to tax payer they are paying interest now so why would they stop.

I don't see anything wrong in people being kicked out if they cannot pay off their mortgage when the term is ended.

There were always options open to them such as a repayment mortgage which would have meant that the capital would always be paid back at the end of the term.

I am sick of people whinging when they can't afford to pay off their mortgage at the end of the mortgage term.

They took out a contract for a loan over a period of time which should be paid back at the end of the term. If they subsequently don't have the funds to pay it back then out you go. They took a gamble that didn't pay off.