Dave Beans

Io Mortgates "a Ticking Timebomb" For Those In Their 50S

56 posts in this topic

http://www.dailymail.co.uk/news/article-2115191/Homeowners-50s-facing-mortgage-timebomb-taking-loans-boom-years.html

Homeowners in their 50s are sitting on ‘a ticking timebomb’ of mortgages handed out during the boom years, the financial regulator warned yesterday. During a grilling by MPs, Martin Wheatley, a director of the Financial Services Authority, raised his fears about interest-only mortgages which are coming to the end of their life – but the homeowners have no money to pay off the loan.

Of the 11.2million mortgages in Britain, about four in ten are interest-only, meaning the homeowners pay only the interest but not a penny of the actual loan. Between 2011 and 2020, the FSA expects about 1.5million such mortgages – worth a staggering £120billion – ‘will be due for repayment’.

Mr Wheatley told the Treasury select committee: ‘There is a ticking timebomb that has been created over the last 20 years.’ The FSA said its figures mean 150,000 interest-only mortgages will come to the end of their life every year for the next decade.

The vast majority of people with these types of loans – 80 per cent – have ‘no repayment strategy’, the FSA said. Others have been saving, but have been bitterly disappointed by how their investments have performed. The crisis has been triggered by proposed FSA rules, called the Mortgage Market Review, which will clamp down on interest-only lending.

When they come into force, probably next year, it will be impossible to take out such mortgages unless the person can prove they are saving to pay off the loan. But the rules do nothing to address the problem of loans handed out in the past. David Hollingworth, from the independent mortgage advisers, London and Country, warned such mortgage holders ‘will potentially have nowhere to go’.

They also face new age restrictions, which means they will not be given a new loan unless it ends before they reach the age of 75. It means a homeowner in their late 50s would not be able to take out another 25-year loan.

Tory MP and committee member Michael Fallon warned: ‘There are an awful lot of people in their late 50s... who are not going to be able to remortgage.’

Last night, the Council of Mortgage Lenders said: ‘Lenders are attuned to this issue and will treat borrowers sympathetically.’

Edited by Dave Beans

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Haven't the government said that for people with existing fixed rate mortgages, the current lender had to allow these mortgages to revert to the SVR at the end of the fixed term? Does that not also include fixed rate interest only mortgages?

When the loans were taken out you could get a 90%/85% LTV IO mortgage, and you can't any more. With no HPI the LTV will look at maturity exactly how it looked when the money was lent, so they will have to move to a repayment mortgage..

As they are 50 it won't be a 25 year mortgage, and as they'll be retiring before 25 years come round, a repayment mortgage will be impractical so they will have to sell to pay back the IO mortgage. Hence, forced selling, There are lots of these mortgages, so they'll be lots of selling, look at my thread "FSA announce inevitable crash by 2031" for the numbers,

My link

The banks need HPI to start up again and go fast to make this go away.

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TBH if I could change my £420 a month repayment mortgage to a £45 a month IO mortgage for life I would. It would be just my luck to die at 65 just as I've paid the mortgage off.

As it is I would probably have to live till I’m 200 to make the repayment mortgage cheaper.

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That's alot of people who were not properly advised - they should club together and do the banks for misselling.

Buckers

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When HPI stopped this insanity was always going to be revealed.

I can only assume the plan to repay was to sell up and trade down or simply roll over the mortgage and get another 25 year term and maybe a bit extra for a new car...

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Now here's a chance for Dave to get some votes. A new benefit SMIFTOF Support for Mortgage Interest For Those Over Fifty. This new benefit will use taxpayers money to pay off the loan and cover the interest at a set rate of 6% of the value of the loan. The benefit will be paid forever if you are over fifty. I am surprised no one has thought of this type of scheme before.

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When HPI stopped this insanity was always going to be revealed.

I can only assume the plan to repay was to sell up and trade down or simply roll over the mortgage and get another 25 year term and maybe a bit extra for a new car...

Yes, a lot of time it was 'The increase in property prices will pay off the mortgage'.

Anyone who believed that should be banned from having a mortgage of any sort, driving, operating heavy machinery or using Powerpoint.

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When HPI stopped this insanity was always going to be revealed.

I can only assume the plan to repay was to sell up and trade down or simply roll over the mortgage and get another 25 year term and maybe a bit extra for a new car...

They don't fit tow bars on a hearse. You can't take it with you. I would rather live rich and die poor than live poor and die rich.

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They don't fit tow bars on a hearse. You can't take it with you. I would rather live rich and die poor than live poor and die rich.

But the bloke with the big house, flash car and six figure debt isn't "living rich", he's just pretending with borrowed money and has all the stress of a lifetime of debt.

Surely it's much better to cut your cloth according to your jib. Live in a modest house in a modest part of town and enjoy the feeling of not owing anyone anything.

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Haven't the government said that for people with existing fixed rate mortgages, the current lender had to allow these mortgages to revert to the SVR at the end of the fixed term? Does that not also include fixed rate interest only mortgages?

changing from a teaser rate to an SVR is entirely different to the mortgage reaching maturity.

One is a continuation during a term, and the other is the repayment deadline.

Indeed, it wouldnt surprise me that a "means of settlement via an approved vehicle" clause was not in every IO mortgage ever issued.

not having one is a serious breach of contract....IMHO.

Edited by Bloo Loo

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They don't fit tow bars on a hearse. You can't take it with you. I would rather live rich and die poor than live poor and die rich.

True, but then doing this there's the risk a large part of your life will be full of stress especially if property prices collapse... Providing you live life through the boom and die before the bust it's a great plan.

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Good.

I have a friend, about this age, who bought a BTL back in about 2007 with an IO mortgage. On the one hand, I thought fine, he runs his own small business and it's the only way he's going to get a pension, but on the other hand, I was furious to find out he'd managed to get an index-linked mortgage at a stupidly low rate. At one point he was paying about £150/month and getting £750 in rent. He moaned when his mortgage went up to over £200. He has no plans to repay the capital.

Why should savers subsidise leechers like this?

There is also a group of 50+ who are divorcees, these are the guys that are really going to hurt as I guess many of these have IO mortgages. I can only see the term being increased so they rent from the bank until they die. So the banks created the money, all of it, and gain a solid asset after a few tens of years, whilst you paid for the privilege. A fine scam, indeed!

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changing from a teaser rate to an SVR is entirely different to the mortgage reaching maturity.

One is a continuation during a term, and the other is the repayment deadline.

Indeed, it wouldnt surprise me that a "means of settlement via an approved vehicle" clause was not in every IO mortgage ever issued.

not having one is a serious breach of contract....IMHO.

You're saying that people who borrow money should repay it?

Crazy talk.

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You're saying that people who borrow money should repay it?

Crazy talk.

Crazy indeed. Good God, how is a banker to make his money with that attitude?

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Good.

I have a friend, about this age, who bought a BTL back in about 2007 with an IO mortgage. On the one hand, I thought fine, he runs his own small business and it's the only way he's going to get a pension, but on the other hand, I was furious to find out he'd managed to get an index-linked mortgage at a stupidly low rate. At one point he was paying about £150/month and getting £750 in rent. He moaned when his mortgage went up to over £200. He has no plans to repay the capital.

Why should savers subsidise leechers like this?

There is also a group of 50+ who are divorcees, these are the guys that are really going to hurt as I guess many of these have IO mortgages. I can only see the term being increased so they rent from the bank until they die. So the banks created the money, all of it, and gain a solid asset after a few tens of years, whilst you paid for the privilege. A fine scam, indeed!

Yes I know, I was renting from someone I knew in Romford. He had plenty of equity as the house was part inherited. So a mortgage of £270k or thereabouts and only paying about £200 a month on a BTL I/O with the Chelsea. I've no idea how he managed that. I think he's now moved into his "BTL" and has let some of the rooms. He's only got to let one and $profit! These people are living the life of Riley!

Edited by "Steed"

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But the bloke with the big house, flash car and six figure debt isn't "living rich", he's just pretending with borrowed money and has all the stress of a lifetime of debt.

Surely it's much better to cut your cloth according to your jib. Live in a modest house in a modest part of town and enjoy the feeling of not owing anyone anything.

I suppose it's a balance. My house is worth about 10 years of my take home pay It seems a shame to die and leave all that money unspent.

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Good.

I have a friend, about this age, who bought a BTL back in about 2007 with an IO mortgage. On the one hand, I thought fine, he runs his own small business and it's the only way he's going to get a pension, but on the other hand, I was furious to find out he'd managed to get an index-linked mortgage at a stupidly low rate. At one point he was paying about £150/month and getting £750 in rent. He moaned when his mortgage went up to over £200. He has no plans to repay the capital.

Why should savers subsidise leechers like this?

There is also a group of 50+ who are divorcees, these are the guys that are really going to hurt as I guess many of these have IO mortgages. I can only see the term being increased so they rent from the bank until they die. So the banks created the money, all of it, and gain a solid asset after a few tens of years, whilst you paid for the privilege. A fine scam, indeed!

a new issued mortgage to cover the old one is another new buyer who cant get funds.

The problem lies in the new FSA rules about mortgages ending @75.

And lets not forget, people have IO at all because a repayment is too expensive, and is often a last resort when a repayment mortgage becomes unpayable through circumstances.

and I read elsewhere 40% of all mortgages are IO.

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You're saying that people who borrow money should repay it?

Crazy talk.

Exactly, that's what taxpayers are for ... clue is in the word PAYER. SMI pays the mortgage interest (and in some cases the capital) of people who have mortgages and can't pay, the majority of people who receive this benefit are retired and will receive this until they die, there is no charge on the property and any profits therefore go to the recipients estate and not to the taxpayer.

There will be some other scheme introduced to stop these IO mortgage, home owning, 'hard-working' families being evicted from their homes; the taxpayer can pick up the tab.

Edited by satch

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Exactly, that's what taxpayers are for ... clue is in the word PAYER. SMI pays the mortgage interest (and in some cases the capital) of people who have mortgages and can't pay, the majority of people who receive this benefit are retired and will receive this until they die, there is no charge on the property and any profits therefore go to the recipients estate and not to the taxpayer.

There will be some other scheme introduced to stop these IO mortgage, home owning, 'hard-working' families being evicted from their homes; the taxpayer can pick up the tab.

imagine a person with IO and Shared ownership!

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Providing you live life through the boom and die before the bust it's a great plan.

A bust to die for?

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A bust to die for?

boom boom!

Ill get my coat.

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