MSE News: Interest-only mortgage warning

Former_MSE_Megan_F

Many of the 1.67 million homeowners with an interest-only mortgage could be at risk of losing their homes if they struggle to repay their balance at the end of their mortgage, the Financial Conduct Authority has warned...

Read the full story:
'If you've got an interest-only mortgage you need to check your repayment plan now'

Click reply below to discuss. If you haven’t already, join the forum to reply.

[Deleted User]

Good timing for all the PPI claims companies who were wondering which bandwagon they could hurl themselves onto next.

splurgegun

@ zx81, if you read the article, at the bottom it says

The FCA confirmed in its 2013 research that it had not found any evidence of widespread mis-selling of interest-only mortgages.

[Deleted User]

I did read it.

But I don't see why that will stop claims companies charging a large advance fee for their services. They know there are many suckers out there.

silvercar

My lender has written to me a couple of times over the last few years asking for confirmation of how I intend to repay my interest only mortgage. I guess they are trying to act responsibly or avoid having to take action against those without plans in the future.

csgohan4

silvercar wrote: »

My lender has written to me a couple of times over the last few years asking for confirmation of how I intend to repay my interest only mortgage. I guess they are trying to act responsibly or avoid having to take action against those without plans in the future.

While a large proportion will say selling their house to downsize may work, it may not in some as well, due to debt they have accrued from other sources or lack of equity growth

michaels

I have an interest only mortgage.

I have more than enough cash savings to pay it of.

Apparently I am being naive and burying my head in the sand because rather than paying it off I am making a nice profit getting more interest on the borrowed money than it is costing me to borrow it.

In fact if I were renting from a landlord with no property equity the hand wringers would be relaxed whereas if I were renting from the bank (IO) with almost certainly after 25 years of ownership a fair whack of equity then I would be in deep trouble - go figure.

poppy10_2

michaels wrote: »

I have an interest only mortgage.

I have more than enough cash savings to pay it of.

Apparently I am being naive and burying my head in the sand because rather than paying it off I am making a nice profit getting more interest on the borrowed money than it is costing me to borrow it.

Don't be obtuse. You know most people aren't in the same situation as you. The "hand-wringing" is because many people with interest only mortgages don't have a pile of cash/investments ready to pay it off when the mortgage ends

Nick_C

Seems like a statement of the bleedin' obvious.

Surely when you apply for an Interest Only mortgage, you have to satisfy the lender that you have the means to pay it off at the end of term?

For people that cannot pay it off, I guess they have two options. Try to extend the term, or sell up and use the tax free capital gain to downsize or rent.

poppy10_2

splurgegun wrote: »

@ zx81, if you read the article, at the bottom it says: The FCA confirmed in its 2013 research that it had not found any evidence of widespread mis-selling of interest-only mortgages.

And yet the Financial Ombudsman upholds 1 in 5 complaints it receives over mis-selling of interest-only mortgages.
http://www.financial-ombudsman.org.uk/publications/technical_notes/interest-only-mortgage-case-studies.html#c

Nick_C

The two statements are not contradictory.

There is no widespread evidence of misselling. Some complaints are received but 8 out of 10 are not upheld.