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

kingstreet

shortchanged wrote: »

So did you see a surge in high income multiple IO mortgages in your time?

I didn't.

But then again I spent 1995 onwards working in South Staffordshire working mostly with blue-collar buyers in former mining towns, Stoke, Cannock, Rugeley etc.

Thrugelmir

kingstreet wrote: »

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

Self certification along with a higher risk profile.

Took Lloyds some 4 years to analyse HBOS's mortgage book fully. Their findings were that around 30% of the mortgage book was outside Lloyds risk policy and as such was business that they wouldn't have written.

Thrugelmir

amnblog wrote: »

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?

Going to be a case by case outcome possibly. The requirement of the FCA for lenders to write to affected borrowers has caused a reaction. Other borrowers will move. Others will terminate their mortgages through death, divorce or distress (financial) .

Though there's bound to be a rump of those that take a chance in the hope of forcing the issue. Rather than addressing the issue themselves.

kingstreet

Thrugelmir wrote: »

Self certification along with a higher risk profile.

Took Lloyds some 4 years to analyse HBOS's mortgage book fully. Their findings were that around 30% of the mortgage book was outside Lloyds risk policy and as such was business that they wouldn't have written.

You may be right, but as I said no lender offered to lend more because interest-only was cheaper than repayment.

Let_Us_See

shortchanged wrote: »

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.

This is certainly not the case as most advisers will confirm.

Too easy to overlook the vast BTL market and the shortage of affordable homes in the UK that led to the increase in demand and ultimately house price rises. Housing is like any other product, just a case of supply and demand.

Thrugelmir

Let_Us_See wrote: »

Too easy to overlook the vast BTL market and the shortage of affordable homes in the UK that led to the increase in demand and ultimately house price rises. Housing is like any other product, just a case of supply and demand.

BTL was created on the back of the years of sharp capital appreciation. Hasn't even reached 20 years as an industry yet. The increase in population in more recent years has been the reason for it's continued popularity.

Thrugelmir

kingstreet wrote: »

You may be right, but as I said no lender offered to lend more because interest-only was cheaper than repayment.

However the spin off is the people who are going to struggle to find the capital to repay the mortgage. I recall friends borrowing every penny that they could borrow in order to ride the property market. With the aim of selling up to realise the equity at a later date. Thereby becoming mortgage free.

shortchanged_2

Answer this honestly then amnblog.

Are you as a broker feeling a little worried of the potential backlash of IO mortgages?


It's quite likely to be the next big mis-selling raft of claims (wrongly so in my eyes).


Is your conscience clear?

lonestarfan

There are interest only mortgages and there are endowment mortgages. I had an endowment mortgage. I didn't decide to have an endowment Mortage because it was cheaper. I wanted one because I wanted the nice nest egg at the end. So that was nothing to do with wanting a house I couldn't afford. It was also nothing to do with wanting to have a house in a nice area on interest only without a payment plan that is effectively renting a house in an area of their choosing. I'm ok with people doing that as I've rented and it's not nice. I'd rather have IO and have to downsize later but live in an area of my choosing than rent.
I did once work for a building society and the older members amongst us here will recognise this description - they actively sold IO mortgages to pensionsers eg Anchor Housing comes to mind. The repayment vehicle was sale on death. Max LTV lending was 66 2/3rds. Both my sets of grandparents had this. It meant they could stay in their home and I want that for pensioners. I would like to see the Halifax lifetime Mortage come back as they stopped it. I see lots of posts on this board where the age to borrow is a problem and I think the upper age limit shouldn't be applied as each family has different issues. What does it matter how old they are so long as the bank gets their money back. I realise there have been losses but it's been addressed eg Santander limit it to 50% LTV now for existing borrowers and any further advances above that are on repayment. I'd like to see what the terms are of the santander lifetime Mortage. I would like to see the younger members of the family be able to assist as well. The youngsters in my family will find it hard to afford a home. But they could help grandparents or parents and benefit in some way but the rules won't accomodate them.

yarbar

Well that certainly created a bit of a stir amongst you. However you have all missed the main thrust of the reply which was to poll your knowledge of the Santander Lifetime Mortgage proposals. This has been completely ignored because of my use of the word "unfortunate".

We are all different in this world and all experience differing circumstances in life and I am well aware of a significant number people who find themselves unable to pay back capital in full at the end of their term through no real fault of their own. These people ARE unfortunate and deserve a little more sympathy and assistance than given by many in this thread.

The above was my first contribution to the forum and I have to say I expected helpful opinion and advice. I am disappointed that a lot of that posted is critical almost to the point of being aggressive. What a shame. :(:(