Nearly one million face mortgage difficulty.

Snakey

BobQ wrote: »

I would dispute the "moron" label because some people will always take the easy, short-term or convenient options. Also there are some who are genuinely stupid or naive and make mistakes.

However, can you not see why lenders are concerned? You sound as if you are doing the right thing in paying off what you can as and when you can. It is a plan of sorts and presumably it is evident to the lender that you have such a plan.

Do you really object to telling them what your plan is? As I said earlier I took the same view as yours (ie none of their business until I default). But on reflection I see nothing wrong with telling them.

You're right, I shouldn't have called them morons, it wasn't kind and it wasn't accurate. I did have an enjoyable few minutes composing that newspaper article which is no kinder, so I won't pretend I'm sorry per se, but it wasn't a nice word to have used.

I don't really believe that they had no idea what they were signing up to, didn't realise what "interest-only" entailed and/or allowed themselves to be duped or misled into choosing an unsuitable product. The articles I've read leave me with the impression that there are a number of people out there who knew from the start that they'd never be able to repay the capital but decided to go for it anyway on the grounds that something would turn up to magically make it all alright. Now that hasn't happened they are laying on the "innocent victim" make-up with a trowel in the hope that somebody influential will champion their cause and the debt will be written off or something (so, basically, a variant of "something will turn up" - might as well keep playing 'til the final whistle).

It's my unsubstantiated belief that the vast majority of people who have interest-only mortgages are well aware of their personal mathematics and have made/are making the appropriate arrangements without any significant problems. The figures seem to have been arrived at by somebody saying "if you haven't got a linked financial product, that means you can't repay the loan". I expect that most people are intending to use what used to be called the tax-free lump sum (now PCLS) that you get at the start of your pension, or have ISA investments - neither of which can officially be used as security for anything as far as I know. Others will be quietly paying off the capital as and when they have spare cash, and so they don't need a special savings product any more than someone on a repayment mortgage does.

I had to provide some sort of evidence to keep Santander happy, I'm not sure exactly what went in because I used a broker but basically I said to them that I'd use my PCLS. There was enough equity in the flat that they had no real need to worry if I didn't repay it, anyway. My semi-rant earlier was basically in response to some of the wackier suggestions earlier in the thread about how these sort of mortgages should be banned and anyone still on one should be required to do this, that and the other. Nope, don't have to. Ha.

Thrugelmir

Snakey wrote: »

I expect that most people are intending to use what used to be called the tax-free lump sum (now PCLS) that you get at the start of your pension,

People would require a pension fund of £400k in order to repay a £100k mortgage debt. There's no published data to support your assertion in this regard.

michaels

2 years ago santander were unable to accept other investments, property, equity or cash nor pension lump sum as suitable repayment vehicles - however a vague promise to downsize was entirely acceptable.

Thrugelmir

michaels wrote: »

2 years ago santander were unable to accept other investments, property, equity or cash nor pension lump sum as suitable repayment vehicles - however a vague promise to downsize was entirely acceptable.

That was 2 years ago. Times have changed.

Today Santander announced their monthly charge for a 123 account is rising to £5 a month.

michaels

Thrugelmir wrote: »

That was 2 years ago. Times have changed.

Today Santander announced their monthly charge for a 123 account is rising to £5 a month.

Barstewards, what do you get for the fee, it is not a packaged account. Will cost me 108pa :[

Snakey

Thrugelmir wrote: »

People would require a pension fund of £400k in order to repay a £100k mortgage debt. There's no published data to support your assertion in this regard.

I said pensions or ISAs, although on re-reading my post I can see how my comma was misleading. I should have said "and/or" as well, to make it clearer.

It's likely that the people I know, on balance, earn a fair bit more than the general population, but (if the media is to be believed) being able to buy property at all has been the sole preserve of the wealthy and/or high-earning for many years now. And it's been a while since interest-only mortgages have been available to all, so we're looking at a privileged sub-set of a privileged sub-set. Statistics about how the "average adult" has a pension fund of £40k and savings of £800 or whatever are unlikely to be useful to us there.

Retiring with a pension pot of £400k is not unrealistic after 45 years in a professional career - and you only need half of that each if there are two of you.

One of the joys, for me, of being an anonymous commenter on an internet forum (as opposed to e.g. producing a report for a client) is that I don't have to support my assertions. Even better, I don't even have to pretend I know what I'm talking about. I can read the thread, say how it looks from where I'm standing, and then move on. It's nice and relaxing (and it's why I don't usually comment on my actual area of expertise, which is tax law). I like to think that people approach these forums in a spirit of healthy enquiry and when they see a claim from some random person will either believe, disbelieve, ignore or do further research, as they see fit (which is why your comment is useful, since it highlights this). Money back if not completely satisfied.

wotsthat

Thrugelmir wrote: »

That was 2 years ago. Times have changed.

Today Santander announced their monthly charge for a 123 account is rising to £5 a month.

They still accept sale of the mortgaged property as an acceptable repayment vehicle for IO.

Thrugelmir

wotsthat wrote: »

They still accept sale of the mortgaged property as an acceptable repayment vehicle for IO.

Only up to 50% LTV though

tara747

BobQ wrote: »

Those making an informed decision to accept the risks of an IO mortgage are not the problem.The problem is those who cannot sell the house and afford to buy or rent a property of the size they need in the future.

People are not that clever with big financial decisions and the lenders exploit this. Had everyone who went IO mortgage had to sign a simple statement "I agree that on (date) the lender may evict me and sell my home unless I have repaid the loan by other means" and a copy was sent to them annually, you would have no sympathy. But in practice it never put this way.

I think it was far better when buyers had to provide a financial product secured on the property. Endowments were not perfect but at least they meant that most of the loan would be repaid. Even then, there were often policies that were expensive but Guaranteed to repay the loan and other cheaper ones that did not guarantee repayment and the latter were the ones mostly sold.

But those who have ignored the warnings do not deserve much sympathy. I suspect many of them will also have failed to budget for a pension and will also have enjoyed new cars, extensions and expensive holidays. Equally those who have had such loans have mostly had them for years and seen a lot of capital appreciation. But if they chose to release equity as many will have done, this again is very poor judgement.

What bit of 'Interest Only' is hard to understand??

Seriously, I have no sympathy for them whatsoever. They are adults, nobody forced them to take out an IO mortgage.

wotsthat wrote: »

This is a simple matter as far as I'm concerned. I couldn't give a monkey's if people don't have the means to pay of their IO mortgage - I don't want to be on the hook.

It's pretty clear what interest only means but the banks have spent some time and effort covering their backsides to ensure the absence of doubt. That means I'm unlikely to have to fund a 'scandal' whereby people on IO loans get state funding so they can pass on the equity to their offspring tax free.

I wish I could thank this post 100 times. Well said.

gadgetmind

michaels wrote: »

2 years ago santander were unable to accept other investments, property, equity or cash nor pension lump sum as suitable repayment vehicles - however a vague promise to downsize was entirely acceptable.

Ditto Barclays for an Interest Only mortgage we did a few months ago. They would accept "Professionally Managed" ISAs, but I'm DIY and it would have cost money to get a charge on them, so ticking "Sale of mortgaged property" was easiest. They did however need a certain level of equity to allow this, but we were only going to 10% LTV anyway.