Mortgage term ending - capital unpaid - what will the Market do?

amnblog

With another thread today from borrowers near to retirement with outstanding funds on their mortgage I wonder what the Market will do to handle this problem.


With large numbers of householders who do not have the capital to secure their property outright what is the answer?


Sell and downsize is sound advice but is it practical - for many it is not.


Where a child is in a position to support a parent's mortgage the Market does not allow it easily.


Where a borrower wishes to extend their mortgage beyond age 65 the Market also does not allow it easily.


Equity release products are a partial solution but a long way short of practical.


Against this we have the problem of the younger generation not being able to get on to the property lander.


Is the multi-generational mortgage a solution?

yarbar

Towards the end of last year there was a lot of talk in the press about Santander launching a Lifetime Mortgage product to help people trapped in this unfortunate position. Has anyone heard or seen any more about this move? :T

shortchanged_2

yarbar wrote: »

Towards the end of last year there was a lot of talk in the press about Santander launching a Lifetime Mortgage product to help people trapped in this unfortunate position. Has anyone heard or seen any more about this move? :T

Why is it unfortunate?

People had the choice to take out an IO mortgage. They were either taken out to reduce monthly outgoings or for people to get a property they couldn't actually afford.

Let_Us_See

Whatever the reason for it, it is still an unfortunate position to be in and a little sympathy and understanding would not go amiss.

shortchanged_2

Let_Us_See wrote: »

Whatever the reason for it, it is still an unfortunate position to be in and a little sympathy and understanding would not go amiss.

People taking out IO mortages contributed to the market being more and more unaffordable for many.

Let_Us_See

shortchanged wrote: »

People taking out IO mortages contributed to the market being more and more unaffordable for many.

And the reasoning behind this statement?

*~Zephyr~*

So Banks happily flogged too many IO mortgages to people who never even gave a thought to a repayment vehicle and now, when the birds are finally coming home to roost, Santander pull out this "revolutionary" new product which is basically just you signing your house over to the bank?

It's hardly a lifeline is it?? Santander never asked me once how I planned to repay the capital when I took out my IO mortgage. They just didn't care. And none of them did. The banks didn't care because they knew they could always repossess and the customers were either too daft or short-sighted to worry about it either.

I always knew my IO mortgage was a short-term arrangement and, after 3 years I paid off half the capital and switched to a repayment mortgage as planned. But Santander never knew that, because they never asked.

I really feel for those people who are at the end of the term with no way of repaying because, whilst they should definitely have been more savvy and taken the repayment vehicle route, they were sold a pup to some extent.

IO mortgages should never have been sold without a repayment method. I know endowments got a bad rep over poor performance but even if they didn't cover the entire debt, they still went someway to reducing the capital.

martinsurrey

Unfortunate:

1. having or marked by bad fortune; unlucky.
   
   
   
   

Fail to see how not planning for the repayment of debt is unlucky.

I agree its a bad situation to be in, but unfortunate it is not.

A multi generational mortage is just another way for the younger generation to fund, and prop up property prices for the generation that insist its thier right to have it all.

*~Zephyr~*

shortchanged wrote: »

People taking out IO mortages contributed to the market being more and more unaffordable for many.

I understand what shortchanged is getting at here. There is the (very valid) argument that, if you can't afford the repayment mortgage, you can't afford the house. IO mortgages allowed people to stretch themselves much further and allowed them to buy more expensive (overpriced?) properties.

I think what shortchanged is saying is that, if the IO mortgages didn't exist, no-one would have been able to afford as much and therefore house prices would have possibly come down.

Whilst I can see the logic, I'm not convinced of it. Eventually, someone would be able to afford to pay the asking price, however ridiculous it might be. IO mortgages just sped up the process, possibly contributing to the overheating of the housing market.

shortchanged_2

Let_Us_See wrote: »

And the reasoning behind this statement?

As mentioned by zephyr. Many IO mortgages were taken so people could 'afford' a more expensive property, this in turn helped push prices up further and contributed to the mess we are now in.

kingstreet

I don't recall lenders ever lending higher income multiples to those taking an interest-only mortgage.

If it was 5x income, it was 5x income regardless of the repayment method. Whether the borrower used the lower payments to fund a more consumptive lifestyle and didn't think about the consequences to come later, I can't say...