Interest Only Mortgage Compensation - Do we have a claim?

inquisitivewanderer

My parents bought their house back in 1999, originally on a capital repayment plan. Unfortunately with interest rates rising and my dads work drying up as a taxi driver, around 10 years ago (possibly more), the lender moved him onto an interest-only mortgage.
Both of my parents are naive beyond belief, I think I am the only one out of 3 children that has learnt the meaning of money/how to budget etc, and unfortunately only now am I able to understand how bad they are with their money. For example, I recently learnt that a couple of years ago my father missed two payments on a life insurance policy and rather than speak to them and catch up, he let it slide, therefore cancelling the insurance, only for my Mother to be diagnosed with stage 3 breast cancer a couple of months later. If the plonker had sorted the life insurance out I wouldn't even need to be posting here today.
Anyway, I fail to understand how any sane lender would have agreed to give them a mortgage as his earnings are so low and my mother has only ever worked part-time due to childcare responsibilities etc. I fail to understand this, even more, when it comes to allowing him to move onto an interest-only mortgage.
There must have been some discussion around whether they could afford to pay if the mortgage went back onto capital repayment terms, or if it stayed as interest only for the remainder of the mortgage what would they do to pay off the debt, but my parents state not. They even say that it wasn't explained that the mortgage wouldn't actually be paid off by paying interest only.

Having been pointed to this link this afternoon via a friend, and therefore having answered no to a number of the "does it apply to us" type questions, I am fairly sure we have a case to complain. 

Just wondering whether there are any folks with a similar experience of claiming for mortgage compensation, and if so, how to go about doing so for my parents.

Socajam

Does your parent have an endowment policy?

-taff

Need more info. Being sold an interest only mortgage isn't a complaint reason in itself, nor is being bad with money. When you say there must have been some discussion but they say not, they might have imperfect memories. You need to know exctly who sold it to them, how, when and what was given to them in the way of information, was a it a broker who did that, was it their lender themselves.

Don't forget, they had a mortgage, therefore they had a house. If they couldn't afford the repayments, they would have lost the house if they hadn't switched to a lower payment. No one would have come paid it for them, so it sounds like the choice was go lower, or lose the house.

SonOf

My parents bought their house back in 1999, originally on a capital repayment plan.
Ok, that makes the original sale pre-regulation.

Unfortunately with interest rates rising and my dads work drying up as a taxi driver, around 10 years ago (possibly more), the lender moved him onto an interest-only mortgage.
That confirms the lender was sympathetic to your parents situation by giving them some breathing space.    So, all good and correct so far.

Anyway, I fail to understand how any sane lender would have agreed to give them a mortgage as his earnings are so low and my mother has only ever worked part-time due to childcare responsibilities etc. I fail to understand this
In the credit boom, lending multiples were higher.   However, in 1999, mortgages were unregulated.   Regulation didnt start until October 2004 and it is not applied retrospectively.  So, if your parents, for example, used an estate agent or mortgage broker for their mortgage (which most people do) then they do not have to consider the complaint and the lender has no liability to the mortgage advice given by brokers/advisers/estate agents as it is pre-regulation.

even more, when it comes to allowing him to move onto an interest-only mortgage.
Nothing wrong with that.   It is a method that has been used many times as a short term measure to help people in financial problems.

There must have been some discussion around whether they could afford to pay if the mortgage went back onto capital repayment terms, or if it stayed as interest only for the remainder of the mortgage what would they do to pay off the debt, but my parents state not. 
There probably was and your parents probably told them that they could afford it later but just needed to get back on their feet for a while.   However, it doesn't really matter as it is the sort of conversation that would have been undocumented.  i.e. no evidence either way to say what happened.   Given the choice of losing the house or going interest only and recover the situation or sell later, then interest only is often the logical choice.

They even say that it wasn't explained that the mortgage wouldn't actually be paid off by paying interest only.
I'm sorry, that is highly unlikely.  They were paying a higher amount on a capital and repayment mortgage and requested the lender reduce it to interest only (as lenders do not offer it - its a request that needs to be made).     Obviously the name is a give away "interest-only"  and since around 2008, lenders have been sending out repeated warnings to those on interest only saying that they are only paying the interest and will need to find the money at the end.  Many lenders have sent out requests asking how the borrower intends to pay.
So, the scenario you paint of them not knowing seems highly unlikely.

Having been pointed to this link this afternoon via a friend, and therefore having answered no to a number of the "does it apply to us" type questions, I am fairly sure we have a case to complain. 
I can't see any grounds for a successful complaint based on the limited information we have so far.    However, even if it is one of the rare successful cases, and lets assume it was arranged via a lender on advised basis and not non-advised basis, we know from published FOS decisions that they take the gain in property value into account.    For example, in one last year where they upheld the complaint, they told the person that they need to sell the house within 12 months and only if there was a loss between the purchase price and the sale price (after costs) then there would be redress.      

They take this approach as the alternative to buying is renting.   That is what you would be arguing your parents should have been on.   Interest only mortgages are cheaper than rent.  So, they have saved money there.    And if they sell the property for a gain, then they are better off than renting.    So, the net outcome of a successful complaint is usually no redress.

Just wondering whether there are any folks with a similar experience of claiming for mortgage compensation, and if so, how to go about doing so for my parents.
The FSCS recently moaned about the number of try-it-on mortgage complaints and it has brought the rate of the number of successful cases to an all time low.  Right into single digits.   Most of these are people who had sub prime mortgages when they could have had prime or debt consolidation where the savings were negligible in the short term.  most interest only complaints fail.  And remember your parents were not sold an interest only mortgage.  They approached the lender requesting an existing capital and repayment mortgage was changed to interest only.

I have dealt with a number of similar scenarios over the years.  The reasons vary but usually it comes from a desperation to get on the housing ladder and an expectation that putting off til tomorrow will actually result in success.    I have seen plenty of family disputes on this where the borrowers, often just the husband, will tell outright lies to the spouse (or children if they become involved) because they are embarrassed about the situation.  They will deflect the blame or deny things that actually happened because they are scared of the shame that comes with admitting that they made mistakes or that they will be seen as a failure.

So, whilst you are correctly supporting your parents now, do be aware that a number of the things you have mentioned do not seem logical and without evidence to support the allegation, it will work against them.    Be on guard that you are probably not being told the full and accurate story but also be on guard that your parents, in particular the stronger one, is probably scared of how they will be seen and could affect them mentally.

Keep_pedalling

I think you should direct your energies at sorting out the problem at source, your parents in particular your “plonker” of a father. 

If they have no means of paying it off at the end of the term they should in the first instance look at downsizing.

selnna

Has anyone any info on a company called "Trusted Mortgages Online", claiming to be able to get refunds for overcharging on interest only mortages

[Deleted User]

Yes.  They will be a company that takes your money to do something that would cost you a stamp.

Buy a stamp instead.

Thrugelmir

Luke221987 said:

My parents bought their house back in 1999, originally on a capital repayment plan. Unfortunately with interest rates rising and my dads work drying up as a taxi driver, around 10 years ago (possibly more), the lender moved him onto an interest-only mortgage.

Responsibility thereafter lies with your parents not the lender. What you believe they should have done but didn't.