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


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#46 Debbie568

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Posted 15 March 2012 - 08:57 PM

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.


People in the 80s had endowment policies which were meant to earn enough to be able to repay the mortgage at the end of the term with a bit left over! Easy to say in hindsight too good to be true. What's scary is that when the endowment policy falls shortm, as so many have, the homeowner is left with having to somehow raise the money to meet the shortfall, even though it was the bank who sold them the policy, and possibly dudn't sufficiently explain the consequences for the borrower if the expected apreciation of the endowment policy failed to materialise. Offsetting that though is that often these mortgages have run for 20 to 30 years, so the amount that has to be found to pay off the mortgage, always assuming the homeowner is now too old to remortgage, is usually less than £100k. Surely someone in their 50s could raise a £100k mortgage on, say, a £400k house?

#47 cartimandua51

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Posted 15 March 2012 - 09:33 PM

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.


Apparently the average amount per week paid on SMI to the retired is £20.24 per week. Not exactly much compare with housing benefit!
The Govt is proposing to put a charge on equity.
Source
support-for-mortgage-interest-call-for-evidence-ia.pdf

(the document is locked and I don't know how to cut and paste the relevant section)
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#48 satch

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Posted 15 March 2012 - 09:39 PM

Apparently the average amount per week paid on SMI to the retired is £20.24 per week. Not exactly much compare with housing benefit!
The Govt is proposing to put a charge on equity.
Source
support-for-mortgage-interest-call-for-evidence-ia.pdf

(the document is locked and I don't know how to cut and paste the relevant section)

Sue not a lot of money, but we are cutting public services, we don't have any money and a deficit that is still increasing. The majority of claimants are pensioners with a mortgage, how on earth did anyone allow the mortgage terms to extend beyond the retirement age? Unless coming up to retirement there was some MEWing and lengthening of the mortgage term, after all it is free money with no charge on the property ... yet.

Edited by satch, 15 March 2012 - 09:42 PM.

George Osborne July 2013; 'I don't think in the current environment a house price bubble is going to emerge in 18 months or three years.' Mark Carney September 2013; ' ... there has been an improvement in prices and activity (talking about the housing market) Osborne to cabinet as quoted in the Indie October 2013; "Hopefully we will get a little housing boom & everyone will be happy"

Osborne says; “Printing money is the last resort of desperate governments when all other policies have failed.”

George Osborne December 2008; “Savers and pensioners are the forgotten victims … They are innocent bystanders and it’s simply not good enough for the Government to walk on by."

In his 1997 Budget speech, Gordon Brown said, "I will not allow house prices to get out of control and put at risk the sustainability of the future". He went on to say that he did not want a return to "instability, speculation and negative equity" of the 1980's and 1990's.

#49 winkie

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Posted 15 March 2012 - 09:44 PM

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!




At the end of the day there is no difference between a private renter in their +50s and a IO mortgage payer apart from the size of the rent.....

If an IO mortgage payer can't afford to repay their debt why can't they sell the house they can't afford to live in and use the equity (there should be quite a bit if they are over 50 and they bought at the right time with a deposit) to either buy a smaller home outright, or with repayments (a repayment mortgage) that will finish at retirement or use the proceeds to rent like everyone else has to....why should so called 'home owners' get special treatment over and above the renters? ;)
What you don't owe won't worry you.

Less can be more.

#50 Sibley's Love Child

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Posted 15 March 2012 - 10:57 PM

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.


Don't be daft, there'd be rioting on the streets if you suggested, let's say for sake of argument, 200 million pounds of taxpayers money would be used to price themselves out of a home. Each and every year? You've got to be kidding.

Edited by Sibley's Love Child, 15 March 2012 - 10:59 PM.


#51 Sibley's Love Child

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Posted 15 March 2012 - 11:09 PM

I think he was.


My attempt at sarcasm backfires spectacularly.

#52 Sibley's Love Child

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Posted 15 March 2012 - 11:23 PM

I must admit, I felt a little sorry for you. In fact, you were the towering genius and I was the one needing 'dimbo' sympathy. :D


Jolly good, sir.

#53 bland unsight

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Posted 16 March 2012 - 12:01 AM

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.


That's why this, the IO timebomb, is hopefully where it ends, (provided the regulators are allowed, by the elected politicians, to hold the line here).

The bonkers bubble in Japan was made possible by turning 25 year mortgages into 100 year mortgages. It's the last trick in the box, after you've shifted LTV from plausible to 125%, and caved on the requirement for repayment, (i.e. moved to an IO "paradigm"). Only here in the UK could we even be comtemplating rolling forward IO mortgages. That idea deserves its own thread! But even that isn't as bad as the Japanese idea of passing on your mortgage debt to your offspring, and even that bubble crashed!

At some point the political calculus for the government, (whoever they are at the time), will shift from "We're not having a crash on my watch" to "Let's have this crash properly now, and perhaps things will turn around before I'm up for election".

10 million mortgages, 45 million voters - you do the maths.

What's the alternative? If you keep inflating an asset bubble indefinitely by printing, then fiat money becomes meaningless as a means of exchange. The economy becomes a purely a "black ecomony" in the mode of Weimar Germany.

Democracy under the rule of law has proved quite robust, and the fact that we've all been able to share these heretical opinions without having our door kicked in the Stazi is credit to that. All this will pass. And if you have your door kicked in by the Stazi, and live to tell the tale, then go long housing.
Wendell: It's a mess, ain't it, sheriff?
Ed Tom Bell: If it ain't, it'll do till the mess gets here.

#54 oligotroph

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Posted 16 March 2012 - 12:01 AM

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


Which means:

"I'm terribly sorry we won't be giving you a loan, have a nice day"

#55 bland unsight

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Posted 16 March 2012 - 12:47 AM

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


So the unspoken message is that the CML aren't coming out to bat for IO any more. To the Daily Mail readers, in dog whistle, "We are going to throw you under the train and call it a crash. Enjoy."

To the borrower who misses the dog whistle, in a High Street bank near you, sooner rather than later...

"I'm terribly sorry we won't be giving you a loan, have a nice day"


Wendell: It's a mess, ain't it, sheriff?
Ed Tom Bell: If it ain't, it'll do till the mess gets here.

#56 Self Employed Youth

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Posted 16 March 2012 - 02:39 AM

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!


Chelsea are YBS, somehow YBS managed to acquire the bountiful books of BBS in 08, my savings were withdrew within the week, scummy coontz! I Woll not finance my own slavery!
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