People who end up with nothing after 30 years

solidpro

Listening to you and yours on the radio today about people who have reached 65+ and been on an interest only mortgage for 3-30 years and hit a point where they can no longer obtain a mortgage of any sort and ending up being forced to sell.

Do you have any sympathy?

kingstreet

To a certain extent, yes.

As you get older, you become more attached to things which have good memories.

Sometimes circumstances prevent people doing what they should, when they should. To own the property at the end of the term would have cost them money they were unwilling or unable to spend.

They've had the utility of their own home for those years and they may have equity left over after the sale.

Not much more anyone can do, or could have done.

davidmcn

Few of them are likely to have "nothing", are they? At the end of a normal mortgage term they'll generally have a fair amount of equity in the property, as well as additional savings (or at least the opportunity to have accumulated them) due to having had smaller mortgage repayments compared with a repayment mortgage. And they've also had somewhere to live for all those years!

amnblog

The reality is that people today have a focus on a lifestyle rather than on getting monthly income paying bills and keeping debt down.

The early baby boomers benefited from strong company pensions and free education for their kids. The late baby boomers are running into little pension provision and Bank of mum and dad loads. Many rely on inheritance to pay off debt which is increasing late in arriving.

dimbo61

There are about 1.7 million Interest Only mortgages currently in the UK and many people face the prospect of either using lump sums and pensions to pay off mortgage debt or trading down to a smaller property or renting.
How you spend your income, how much you earn and job, pension, savings are different for everyone.

dunstonh

solidpro wrote: »

Listening to you and yours on the radio today about people who have reached 65+ and been on an interest only mortgage for 3-30 years and hit a point where they can no longer obtain a mortgage of any sort and ending up being forced to sell.

Do you have any sympathy?

Not really. There may be some who have had circumstances that put them in that position but for many, it was a lifestyle choice.

Plus, they haven't really ended up with nothing. 30 years of owning a property whilst paying interest only means they have paid less than renting and have built up significant equity that they will realise when they sell up.

What have they been doing with all that money over 30 years? A lot use it to spend on a consumer lifestyle. Frequent holidays etc. Their priorities were different.

silvercar

At worst the vast majority will have ended up with equity, something they wouldn't have got by renting. In some cases their homes will have earned more than they did.

PasturesNew

They'd have known for 30 years .... and will, in a lot of cases, have the option of selling up and buying something for cash from the difference between the mortgage they first borrowed and what they sold for.

If you bought in, say, 1987, at £50k and it's now worth £300-400k, there are a lot of houses that can be bought for £250-300k.

If you bought in 1987 at £10k and it's now worth £65k your options are more limited, but if you've not bothered to pay off £10k in 30 years then few would have "sympathy".

It's unfortunate .... but the majority of these people will have been in a position to change their outcome at many points in the last 30 years. At least during that time, paying interest only, they'll have been settled in one spot and not had to fork out agent fees and moving costs every 3-4 years to move on the whim of a landlord.

[Deleted User]

10 years ago, I got myself on the ladder with an IO mortgage. I can see how tempting it would have been to stay on one of those. My current repayment mortgage in my new home is 4x the amount of the old IO mortgage.

But to have no repayment method at all, for 25 or 30 years? Well, that's just stupidity, isn't it?

Sell up, use the equity towards renting while you're a pensioner I guess. You can't have your cake and eat it.

Edi81

Plus many of those people would have had endowments that were meant to cover the principle.
When the warnings came out 15 years ago about putting alternative repayments in place some of these people may have chosen not to. I don!!!8217;t really feel sorry for them - unless they genuinely couldn!!!8217;t afford a repayment mortgage at that time.

They have had a number of years of low interest rates (likely on trackers) so had plenty of opportunity to pay down the principle.

Thrugelmir

solidpro wrote: »

Do you have any sympathy?

Yes and no. I'd judge each case on it's merits. The run up to the GFC was a period when people were allowed to overburden themselves with debt. Those employees working for HBOS tasked with selling mortgages found a cabbage on their desks if they didn't hit targets. A culture that's had to believe existed in a bank. Though if you sack your head of risk and employ a sales director instead (who had zero financial background) then the consequences are unsurprising.

Hopefully interest rates will remain low long enough to allow an orderly exit from the past.