Two banks to offer interest only mortgages again

Generali

Graham_Devon wrote: »

apparently this will increase pressure to increase interest rates....

It creates another reason to raise rates/cut QE. Rates are low and QE in place to try to get people to take on more risk. This product is people taking on more risk.

However, remember that (part of) the point of QE is to raise people's expectations of future inflation. The BoE can't do that if they go out and say, "If inflation or credit creation starts to rise we will raise rates". The policy and the theory behind the policy requires the Bank of England to lie about what they are doing.

OffGridLiving

Thrugelmir wrote: »

You slate the banks for not lending. When a couple of banks offer a niche product to lend money you slate them.

This recovery is going to be a long drawn out affair. Small steps.

Providing everything is done in a controlled measured way then there's no issues. Much has changed since 2002-2007 in the lending markets. So best to accept that times have changed.

The problem doesn't lie with new mortgage advances, but the legacy left by the mortgage lenders that failed.

I wish I could thank this twice. It seems that those with the least financial understanding are the ones who shout the loudest for financial regulations without really thinking through the impact (and then moan the loudest when it impacts themselves). It's good to see some reasonable and measured responses in here.

I was forced to get a repayment mortgage when I remortgaged a few months back. My monthly mortgage payments have doubled and so I have had to vastly reduce the amount of money going into my pension and ISA funds. Graham and co were moaning just the other week that too much money is being used to service mortgage debt, and we should be investing more in shares/funds/company bonds to boost industry. This is something I agree with and was doing, but the withdrawal of IO mortgages has stopped that. All the money that used to go into shares in my ISA, benefitting many companies now goes to the bank in repayments, benefitting one.

CLAPTON

OffGridLiving wrote: »

I wish I could thank this twice. It seems that those with the least financial understanding are the ones who shout the loudest for financial regulations without really thinking through the impact (and then moan the loudest when it impacts themselves). It's good to see some reasonable and measured responses in here.

I was forced to get a repayment mortgage when I remortgaged a few months back. My monthly mortgage payments have doubled and so I have had to vastly reduce the amount of money going into my pension and ISA funds. Graham and co were moaning just the other week that too much money is being used to service mortgage debt, and we should be investing more in shares/funds/company bonds to boost industry. This is something I agree with and was doing, but the withdrawal of IO mortgages has stopped that. All the money that used to go into shares in my ISA, benefitting many companies now goes to the bank in repayments, benefitting one.

why exactly does borrowing to buy shares, funds, bonds,pension boost industry?

why did money going into shares in your ISA benefit many companies whereas repaying the banks (who will then lend it to a variety of companies/individuals) benefit only one?

System

"mute point". Rage.

chewmylegoff

Haven't first direct been offering interest only offset mortgages throughout the financial crisis?

OffGridLiving

CLAPTON wrote: »

why exactly does borrowing to buy shares, funds, bonds,pension boost industry?

I'm sure that I don't need to go into the whole structure of shares and corporate bonds and how they help to finance business?

As to borrowing money to buy shares.... Not sure what you're on about here Clapton. I borrowed money to buy a house. How I choose to pay off that loan, whether directly via a repayment mortgage or indirectly via returns from the share/bond market should be down to me, not the nanny state.

If you mean that I have borrowed money to buy a house and that if I spend money anywhere other than on the house loan, that I'm using borrowed money to buy stuff, well that would hold true for every purchase I made until my mortgage was paid off. I'd have borrowed money to buy food, borrowed money to pay for my utilities, borrowed money to go to the pub......etc. etc.

CLAPTON wrote: »

why did money going into shares in your ISA benefit many companies whereas repaying the banks (who will then lend it to a variety of companies/individuals) benefit only one?

I keep reading that the banks aren't lending and that companies are doing rights issues, etc. to raise money to invest for their growth. The banks seem to be investing in themselves at the moment, trying to recapitalise. They can do that on the interest payments on my loan, while my capital payments can go directly to companies.

CLAPTON

OffGridLiving wrote: »

I'm sure that I don't need to go into the whole structure of shares and corporate bonds and how they help to finance business?

As to borrowing money to buy shares.... Not sure what you're on about here Clapton. I borrowed money to buy a house. How I choose to pay off that loan, whether directly via a repayment mortgage or indirectly via returns from the share/bond market should be down to me, not the nanny state.

If you mean that I have borrowed money to buy a house and that if I spend money anywhere other than on the house loan, that I'm using borrowed money to buy stuff, well that would hold true for every purchase I made until my mortgage was paid off. I'd have borrowed money to buy food, borrowed money to pay for my utilities, borrowed money to go to the pub......etc. etc.




I keep reading that the banks aren't lending and that companies are doing rights issues, etc. to raise money to invest for their growth. The banks seem to be investing in themselves at the moment, trying to recapitalise. They can do that on the interest payments on my loan, while my capital payments can go directly to companies.

I was questioning the economic logic and not your right to choose.

As this thread is about banks lending on interest only mortgages it seems a little bizarre to suggest that banks aren't lending.

Cornucopia

Joeskeppi wrote: »

"mute point". Rage.

Moot point.

OffGridLiving

CLAPTON wrote: »

I was questioning the economic logic and not your right to choose.

As this thread is about banks lending on interest only mortgages it seems a little bizarre to suggest that banks aren't lending.

As I suggested in my last post, I'm not about to try and explain how companies finance themselves through shares and bonds, there are plenty of resources online to learn from if you want to know more about corporate finances.

As to your other point. If banks were lending normally, then we wouldn't be discussing a couple of banks providing IO mortgages. All the banks would be providing these products and so it'd actually be bizarre to comment on a normally functioning banking sector.

Loughton_Monkey

OffGridLiving wrote: »

I'm sure that I don't need to go into the whole structure of shares and corporate bonds and how they help to finance business?.....

A moot point [although Graham might call it 'mute'].

But this was originally raised in the context of buying ISA and pension funds. However much goes into these, I wouldn't call it "help" for business unless we are talking about a new issue. These probably account for 0.001% of each day's trading.

Once a company issued its shares (in 1957), and maybe a couple of bonds in 1980 and 1990, they generally don't give a monkey's cuss who owns them. If I bought £1 million of Persimmon shares from Graham today, it doesn't give them a penny more capital to build more houses.