Nearly one million face mortgage difficulty.

wotsthat

Thrugelmir wrote: »

Only up to 50% LTV though

50% IO, 25% repayment, 25% deposit and a declaration up front that they intend to sell to repay the loan. I've seen the questionnaire and it's more than yes/ no so claiming ignorance or mis-selling is going to be difficult a few years hence.

There would need to be a nominal fall of 50% in 25 years for the sale proceeds not to cover the debt.

Even those with the most gloomy of outlooks can't really be expecting that ticking time bomb to go off.

As I keep saying some people will come a cropper with IO but most will be as a result of life s**t happening rather than a function of being IO per se.

tara747

BobQ wrote: »

You make a fair point, although I doubt any of current owner occupiers with IO mortgages deliberately set out to cause you this difficulty.

I suspect that for those that have no requirement for housing at the size they "own", there will be increased demand for 1/2 bed flats with the houses sold. For those that do need properties of the size they have, they will stay put and continue to pay IO. Those that cannot afford to stay will need a subsidy of some kind. I doubt we will justify making 70 year olds homeless.

Er, why not? Why shouldn't they pay what they owe? How about a 70-year-old who's rented all their life? Would you say that they should stay where they are but cease paying rent?

IO mortgages are just like renting a house from a LL, except you're renting money from the bank. Oh and you're responsible for ALL the upkeep, buildings insurance and repair costs.

cells

Interest only should be available to FTBs and anyone else who wants it and signs to say they understand that they understand that they are not paying off the capital and at the end of the term they will still owe X

wymondham

tara747 wrote: »

IO mortgages are just like renting a house from a LL, except you're renting money from the bank. Oh and you're responsible for ALL the upkeep, buildings insurance and repair costs.

not quite, you can't sell a rented house and (hopefully!) gain from it....

Thrugelmir

wotsthat wrote: »

There would need to be a nominal fall of 50% in 25 years for the sale proceeds not to cover the debt.

From the lenders perspective that's not the issue. Recovery and management of the debt is where the real expense is incurred.

wotsthat

Thrugelmir wrote: »

From the lenders perspective that's not the issue. Recovery and management of the debt is where the real expense is incurred.

When someone gets to the end of an IO mortgage, sells the house (as agreed) and repays the debt it doesn't cost the lender a penny.

Graham_Devon

wotsthat wrote: »

Anyone with an IO due to be repaid before 2020 has been contacted and asked how they'll repay it. One of those options was to sell.

And just 10% actually responded with anything.

Banks managed to contact all those borrowers whose loans were due to expire by the 2020, by May last year, and by the end of December contacted another 427,000 whose loans had longer to run to discuss repayment plans.



However, just 10pc of those borrowers responded to the bank's requests.

Now, you'd think that most who had a plan would respond and just get the matter settled.


With only 10% responding, it does raise some questions.



http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11883281/Banks-slash-another-300000-interest-only-mortgages.html

wotsthat

Graham_Devon wrote: »

And just 10% actually responded with anything.

Now, you'd think that most who had a plan would respond and just get the matter settled.

With only 10% responding, it does raise some questions.

Good find. I'm surprised it's as low as 10% - next time they contact them they'll have to do it recorded so there's evidence that the letter explaining that an interest only mortgage is interest only has reached the interest only mortgage holder just in case they later try to claim they didn't know interest only meant interest only. It's a sad state of affairs when money has to be wasted to protect against fraudulent claims of mis-selling.

Some interesting stuff in the CML press release that the Telegraph have wrote the nice little story about.

http://www.cml.org.uk/news/press-releases/cml-reports-16-annual-fall-in-interest-only-back-book-as/

Over the past two years, the total number of interest-only loans outstanding has fallen by over a quarter, according to the Council of Mortgage Lenders - with a 16% reduction in the number of loans over the past year alone.

As at the end of 2014, CML members reported that there were around 1.9 million pure interest-only mortgages outstanding, and around 460,000 part interest-only mortgages. This was around 300,000 fewer pure interest-only mortgages and 160,000 part interest-only mortgages than a year earlier.

A quarter of this reduction is down to natural attrition (loans maturing and repaying at the end of their term). Around a third can be attributed to full redemption of loans not set to mature until at least 2028 - suggesting that many borrowers are taking action well before problems could arise. This also suggests that a significant group of borrowers are successfully remortgaging onto full repayment terms without falling foul of new affordability rules.

Of those loans that have matured, few have failed to repay. In total, there are fewer than 16,000 loans outstanding which have matured but not yet repaid or restructured - and previous experience shows that most such loans subsequently redeem within a relatively few months of maturity.

Ticking time bomb my !!!!.

lisyloo

Now, you'd think that most who had a plan would respond and just get the matter settled.

That's odd.
I dislike people wasting my time, calling me (especially at work) and sending me messages about things that aren't of any interest to me.
I find most people are of a similar view although some are more tolerant than others.

wotsthat

If I had an IO mortgage and was sent a letter asking how I planned to repay it I'd ignore it too.

Surprised 90% did the same though.