Nearly one million face mortgage difficulty.

N9eav

My sis in law did the same. £60,000 interest only. 8 years to go and still owes £60,000.


So she just had the house valued at £289,000. I think you can do the maths.... Later this year she will be in a new house with no mortgage....


I guess it does not work for everyone, but that was the idea for some

princeofpounds

There is always a tension between the sale of financial products and the knowledge of the consumer.


Even considering things that you think would be the most basic and obvious concepts, like an interest-only mortgage, it turns out that a large segment of the population either:


- don't actually understand
- claim they don't actually understand
- even if they do understand are incapable of basic long term planning.


In almost every other arena, selling a product is ok as long as it works as described. In finance, there is always this ambiguous idea that sometimes you bear a special responsibility for the customer's overall wellbeing.


It's technically stupid, but in reality sometimes it is 'needed' because people will act like financial lemmings.

Gavin234

And this is before interest rates go back to normal!

Estimations are USA will put interest rates back up this year and UK will follow suit next year by 2017 interest rates will be nearer to long term normality. Just in time for what the bbc link says.....

The first sizeable wave of repayment problems is expected to appear in 2017-18, when endowment mortgages sold in the 1990s reach their peak period of maturing.

mayonnaise

Ah, another ticking timebomb.
I could dig up threads a decade old warning about this same ticking timebomb, but I won't because Graham will tell me off.

Gavin234

mayonnaise wrote: »

Ah, another ticking timebomb.
I could dig up threads a decade old warning about this same ticking timebomb, but I won't because Graham will tell me off.

So in your opinion none of these ticking time mobs will ever be a problem?

These interest only people will just find the money from somewhere just in time, right?

chucknorris

Gavin234 wrote: »

So in your opinion none of these ticking time mobs will ever be a problem?

These interest only people will just find the money from somewhere just in time, right?

Not in my case, I 'found' it years ago, I could pay off all 5 of my mortgages now (in fact, as I said a few years ago) but why on earth would I? When my mortgage rate is only 1%, and my dividend income is over 3%? Especially as the market is currently down, now is the time to at least hold (if not invest more), not sell shares.

Gavin234 wrote: »

The first sizeable wave of repayment problems is expected to appear in 2017-18, when endowment mortgages sold in the 1990s reach their peak period of maturing.

Anyone who bought in the 90's is sitting on massive equity, easily larger than the endowment shortfall (by a significant margin).

missbiggles1

My parents had an interest only mortgage which was repaid when the property was sold on the death of the second person. This worked well for them, was cheaper and more secure than renting and achieved some equity. We were planning to do the same and then had the rug pulled from under us a few years ago.

It was the change in lenders' practice that caused this problem, not greed or irresponsibility on the part of most of the borrowers.

ukcarper

Gavin234 wrote: »

And this is before interest rates go back to normal!

Estimations are USA will put interest rates back up this year and UK will follow suit next year by 2017 interest rates will be nearer to long term normality. Just in time for what the bbc link says.....

The first sizeable wave of repayment problems is expected to appear in 2017-18, when endowment mortgages sold in the 1990s reach their peak period of maturing.

Average price in mid 90s was £90k assuming worse case 100% mortgage with a 20% endowment shortfall £18k outstanding not an insurmountable problem.

As to interest only mortgages I wonder how quick banks will be to foreclose if mortgage is still being paid after all their main concern is making money and they still will be.

whatmichaelsays

princeofpounds wrote: »

There is always a tension between the sale of financial products and the knowledge of the consumer.


Even considering things that you think would be the most basic and obvious concepts, like an interest-only mortgage, it turns out that a large segment of the population either:


- don't actually understand
- claim they don't actually understand
- even if they do understand are incapable of basic long term planning.


In almost every other arena, selling a product is ok as long as it works as described. In finance, there is always this ambiguous idea that sometimes you bear a special responsibility for the customer's overall wellbeing.


It's technically stupid, but in reality sometimes it is 'needed' because people will act like financial lemmings.

Absolutely agree. I think this quote from the article above sums it up.

"We were silly. We'd just had our first baby," she said.
"But they shouldn't have given the loan. We didn't understand what we were taking on and didn't think about having to pay it back."

I'm sorry, but if I was taking on a £200,000 financial commitment, I'd make damn sure that I knew what I was taking on and letting myself in for. And if I couldn't understand it, I'd get someone who could (even if it meant paying for it).


Simply signing on the dotted line and hoping it will be OK is, quite frankly, complete idiocy that doesn't deserve any sympathy - particularly if you're going to try and turn the blame on the lender.

GunJack

what happened to the lender checking you had a suitable repayment scheme (endowment, investment plan, whatever) before letting you have an IO mortgage? up to the mid-90s wasn't it that this was the norm??