...next 'it wasn't my fault' problem for homeowners?

[Deleted User]

Hiya.

Just seen this article on the BBC about the problems many 'interest only' borrowers may have at the end of the mortgage term, if they can't pay back the capital.

Interesting artice, but I was struck by one of the quotes -

'Sarah, who lives near Brighton and has an interest-only mortgage, said she and her husband could hardly afford the interest when they bought their house and frequently fell into arrears.

"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."

Will this be another PPI or are folk, like me, getting a bit tired at the victim card being played when folk have to face up to reality? Presumably Sarah and her partner understood that the monthly payments x 12 x the number of years of the loan wouldn't be enough to pay off the cost + the interest?

Link to BBC story - http://www.bbc.co.uk/news/business-34144333

PPI phone calls are bad enough.... will we now have years of recorded phone messages 'Have YOU ever been sold an interest-only mortgage........?'

WR

mw123

I got the same impression when I was reading the article and somebody had said that they didn't understand what they had been sold.

amnblog

I suspect, Sarah, her husband, and the baby will not be moving out anytime soon.

betmunch

I would like to see someone actually try and prove a financial loss to Sarah. To simplify:


25 years ago she took an interest only loan so she now owns a property. If she hadn't taken the loan she would have needed to rent instead.


If she bought for £100,000 then the property would now be worth £326,000 according to Nationwide. Assuming it was a 100% loan then that's £226,000 profit if she is forced to sell.


Now I don't know what her mortgage payments would have been over the years, I expect they went quite high for a few years and then very low in the last few years. Compare that to rent, and correct me if I am wrong (and I could well be) rental has only had a steady increase over the last 25 years


I believe over the course of the mortgage term she would have paid less on the monthly mortgage payments than she would have in rental payments and had security of tenure too.


Sarah cant pay back the £100,000 loan she took out 25 years ago but she can sell the property so she gets likely cheaper housing costs over 25 years and £226,000 in her back pocket.


She shouldn't be complaining about how she shouldn't have been given the loan, she should be thanking her lucky stars the bank manager GAVE HER WHAT SHE ASKED FOR!!!!


Apologies, if I have used figures that don't match the article if they are in there, I cant read this sort of thing without getting angry, so I haven't read it!

mrginge

You lot do realise that 'Sarah' is more than likely a piece of artistic license used to pad out an article and give it a sense of authenticity.
interesting that as far as i can see Sarah isn't mentioned by anyone else who has covered this 'research'.

The whole thing is just a PR guff from citizens advice based on some yougov survey.

andyfromotley

Having had quite a few interest only mortgages dating back over a considerable time i am highly sceptical of anyone who claims that they didn't realise the implications of such a product.

I feel that there is a material difference between IO mortgages and the other products that have led to compensation. Those products were either by and largely useless to the vast majority who bought them (PPI) or mis sold by promising something they were never likely to deliver (endowment).

It is very difficult to make a similar claim about Interest Only Mortgages.

I support the compensation in the other products but would be mortified were there to be large scale compensation for IO mortgages!!

Thrugelmir

betmunch wrote: »

9 years [STRIKE]25 years [/STRIKE]ago she took an interest only loan so she now owns a property. If she hadn't taken the loan she would have needed to rent instead.

Amended for. That's my thought after reading the article.

Of the 9 years they've enjoyed 6+ years of lower interest rates.

Without the full facts simply impossible to comment.

silvercar

It is not an unreasonable strategy to have selling up as the way to clear an interest only mortgage. The increase in house prices over the 25 years should then be enough to buy a small retirement property. That way it has given a family a big enough home while the children were growing up and an unencumbered home in retirement.

MARTYM8`

No doubt there will be a government bailout scheme for people with interest only mortgages soon.

Oh I didn't realise I wasn't paying for the house - just interest on the loan. The bank literally forced me to do this - as I have no free will?

Oh I didn't realise I didn't have to pay out x pounds a month on top of my loan for PPI. Backdated bailout please plus 8% interest - and endless harassment for the rest of the country via email/texts/answerphone messages.

Oh I didn't realise I didn't have to pay my bank £10 a month for all that travel insurance, mobile phone insurance and car breakdown cover. Cue endless harassment for the rest of the country via email/texts/answerphone messages.

What next?

Endless bailouts for the stupid while the prudent get nowt!

Thrugelmir

silvercar wrote: »

The increase in house prices over the 25 years should then be enough to buy a small retirement property.

For many it won't be. Pensioners in particular have high debt problems. It's not just the mortgage.

dunstonh

I have some sympathy with these people. After all, its not as if the name of the product gave them any clues....