interestrateripoff

£50,000 Rule For Rbs Interest-Only Mortgage Deal

66 posts in this topic

[url="http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html"]http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html[/url]

[quote][b]New interest-only mortgages taken out by Royal Bank of Scotland (RBS) and NatWest customers will be restricted to people earning at least £50,000 under fresh rules announced today.[/b]

The new requirements will help deal with market volatility and are part of RBS and its sister brand NatWest showing "responsible" lending by ensuring the mortgage is affordable to the consumer, the Royal Bank of Scotland group said.

The announcement follows general concerns of an interest-only mortgage "ticking time bomb" across the market, with worries previously raised that some borrowers currently on interest-only deals with lenders may find themselves unable to remortgage. [/quote]

If more lenders follow suite lots of BTL could be locked out of refinancing unless they move to repayment.

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[quote name='interestrateripoff' timestamp='1332874572' post='909001269']
[url="http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html"]http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html[/url]



If more lenders follow suite lots of BTL could be locked out of refinancing unless they move to repayment.
[/quote]


I didn't think you needed an income, the size of the deposit is the income...the rent is the income that pays the interest, up until the deposit still exists. :blink:

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[quote name='interestrateripoff' timestamp='1332874572' post='909001269']
[url="http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html"]http://www.independent.co.uk/money/mortgages/50000-rule-for-rbs-interestonly-mortgage-deal-7593378.html[/url]



If more lenders follow suite lots of BTL could be locked out of refinancing unless they move to repayment.
[/quote]

Rents up!! :angry:
Then down.. :D
Then right down. :D :D :D
Then down a bit more. :lol:

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[quote name='shindigger' timestamp='1332876154' post='909001297']
Rents up!! :angry:
Then down.. :D
Then right down. :D :D :D
Then down a bit more. :lol:
[/quote]

[media]http://www.youtube.com/watch?v=oWvGlPf-z7I[/media]

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I can't make any sense of that to be fair. To arbitrarily set a minimum income of £50k is slightly odd.

I suppose they're basing it on people leveraging heavily but I would have thought that restricting by deposit size would achieve that adequately, after all if you have 50k deposit and a 50k mortgage neither repayment nor interest payments should present a problem for most. Of course 100k wouldn't buy you much now.

I think I would have to draw from that a tacit implication that a jump in interest rates is expected, ie we expect to you be able to cover the interest if much larger than it is now, and the larger deposit will mean we still have an asset to repay the outstanding loan when interest rates jump and we have to foreclose.

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[quote name='Ascii' timestamp='1332876969' post='909001312']
I can't make any sense of that to be fair. To arbitrarily set a minimum income of £50k is slightly odd.

I suppose they're basing it on people leveraging heavily but I would have thought that restricting by deposit size would achieve that adequately, after all if you have 50k deposit and a 50k mortgage neither repayment nor interest payments should present a problem for most. Of course 100k wouldn't buy you much now.

I think I would have to draw from that a tacit implication that a jump in interest rates is expected, ie we expect to you be able to cover the interest if much larger than it is now, and the larger deposit will mean we still have an asset to repay the outstanding loan when interest rates jump and we have to foreclose.
[/quote]


I think the logic of many is that if they have £1m deposit and want to borrow £1m they think they can afford the repayments when they only earn £20k..... :unsure:

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As many have said time and time again. Patience is key. And I have to say - recently just about EVERYTHING points to serious large falls in property prices in nearly all of the UK in the next few years. IMO anyway.

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[quote name='ccc' timestamp='1332877412' post='909001319']
As many have said time and time again. Patience is key. And I have to say - recently just about EVERYTHING points to serious large falls in property prices in nearly all of the UK* in the next few years. IMO anyway.

*maidstone excluded
[/quote]
Fixed

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[quote name='Georgia O'Keeffe' timestamp='1332877518' post='909001321']
Fixed
[/quote]


...you are sibley and I claim my £5. ;)

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[quote name='Georgia O'Keeffe' timestamp='1332877518' post='909001321']
Fixed
[/quote]

Fair call. IMMUNE !!

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[quote name='winkie' timestamp='1332877373' post='909001318']
I think the logic of many is that if they have £1m deposit and want to borrow £1m they think they can afford the repayments when they only earn £20k..... :unsure:
[/quote]

Kind of my point. It only makes sense to apply an arbitrary £50k minimum when you are borrowing say £250k+. Interest as it stands on that in simple terms at 5% is only £12.5k or a little over a grand a month would would be unaffordable on your arbitrary £20k pa. The same logic doesn't apply if you are borrowing a modest multiple hence why a sensible minimum for IO would be very similar to the 2.5x to 3.5 salary we see touted around so much

I have to confess I have a vested interest as I have an IO mortgage albeit at about 0.7x salary in a good year or 3x salary in a bad year. It's currently offset by over the amount lent (one of those "One" type mortgages) and I have a repayment vehicle that will cover about half of the value in 8 years (mortgage term itself is about 25 years from now). I've been (I think) duly diligent and only borrowed what I think I can afford on my salary (not counting the missus' salary as that's beer money). So in real terms I'm paying no interest and have a healthy amount I can draw down for whatever I see fit (business ideas really).

Anyway, I digress. IO mortgages have there place but I would have thought that a modest one is no more of a risk than a modest repayment vehicle. The problem isn't IO lending itself (or for that matter repayment mortgages), the problem is risky lending; the clue itself being the the "r" word.

As long as multiples are sensible in either case (which of course hasn't been the case in recent history) and sensible deposits are taken (in my case deposit now represents about 65% of the property value) I don't see a need for an arbitrary £50k minimum; it makes no sense but for a possible hidden agenda.

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[quote name='Ascii' timestamp='1332879758' post='909001344']
Kind of my point. It only makes sense to apply an arbitrary £50k minimum when you are borrowing say £250k+. Interest as it stands on that in simple terms at 5% is only £12.5k or a little over a grand a month would would be unaffordable on your arbitrary £20k pa. The same logic doesn't apply if you are borrowing a modest multiple hence why a sensible minimum for IO would be very similar to the 2.5x to 3.5 salary we see touted around so much

I have to confess I have a vested interest as I have an IO mortgage albeit at about 0.7x salary in a good year or 3x salary in a bad year. It's currently offset by over the amount lent (one of those "One" type mortgages) and I have a repayment vehicle that will cover about half of the value in 8 years (mortgage term itself is about 25 years from now). I've been (I think) duly diligent and only borrowed what I think I can afford on my salary (not counting the missus' salary as that's beer money). So in real terms I'm paying no interest and have a healthy amount I can draw down for whatever I see fit (business ideas really).

Anyway, I digress. IO mortgages have there place but I would have thought that a modest one is no more of a risk than a modest repayment vehicle. [b]The problem isn't IO lending itself [/b](or for that matter repayment mortgages), the problem is risky lending; the clue itself being the the "r" word.

As long as multiples are sensible in either case (which of course hasn't been the case in recent history) and sensible deposits are taken (in my case deposit now represents about 65% of the property value) I don't see a need for an arbitrary £50k minimum; it makes no sense but for a possible hidden agenda.
[/quote]


Oh yes it is. Even if people chose not to lie through their teeth on the application form, and actually did have a "vehicle" in place.
That vehicle if taken out in the last 10/15 years is upside down and on fire with its legs in the air right now.
I ditched my endowment in 2000 when after various telecoms and dot com booms, my "fund" still wasn't worth what i'd paid in.
I took L&G to the Ombudsman and got my money back with interest. This was my original HPC epiphany. years before coming on here.
That system is bust. So IO is a HUGE problem my friend. Huge. What do you think all these buyers since the early Noughties have been saying on their forms? One of my best friends bullshitted an RBS IO loan.
He borrowed £145k with a £7k deposit. His flat is now at least £20k under water, and hes not cleared a penny. Hes ******ed.
And its not flahsing red on ANY RBS terminal anywhere yet. They will never see the money back. His plan ( im not sure he even had a plan) of capital growth to clear the loan has failed. As it will with thousands, maybe millions, of others, in time.
I'd say this applies to a sizeable chunk of loans since 2004/5.

Tick tock. Edited by shindigger

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[quote name='Ascii' timestamp='1332879758' post='909001344'] The problem isn't IO lending itself (or for that matter repayment mortgages), the problem is risky lending; the clue itself being the the "r" word.
[/quote]

but isnt that what had been warned over the year, massive over reaction by the Banks/authorities etc and causing more pain to the responsible few to try and get a "grip" on the recklesness of the last decade.

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[quote name='shindigger' timestamp='1332881182' post='909001358']
Oh yes it is. Even if people chose not to lie through their teeth on the application form, and actually did have a "vehicle" in place.
[/quote]
Not checking facts would of course be a risky investment.
[quote name='shindigger' timestamp='1332881182' post='909001358']
So IO is a HUGE problem my friend. Huge. What do you think all these buyers since the early Noughties have been saying on their forms?
[/quote]
No idea - but if the banks haven't checked then that would be a fairly clear indication of negligence which of course opens up a very clear path to the risk that you won't recover your loan.
[quote name='shindigger' timestamp='1332881182' post='909001358']
One of my best friends bullshitted an RBS IO loan.
He borrowed £145k with a £7k deposit. His flat is now at least £20k under water, and hes not cleared a penny. Hes ******ed.
And its not flahsing red on ANY RBS terminal anywhere yet. They will never see the money back. His plan ( im not sure he even had a plan) of capital growth to clear the loan has failed. As it will with thousands, maybe millions, of others, in time.
I'd say this applies to a sizeable chunk of loans since 2004/5.

Tick tock.
[/quote]

Very probably so,but again that's clearly negligent lending and also fraudulent borrowing. If both lender and borrower are sensible IO has its place and is both a viable lending mechanism and one which can suit both lender and borrower. A 50k minimum earning limit makes no sense as is just a knee jerk reaction. You may as well say that there is a 75k minimum salary for a repayment mortgage (allowing an extra 50% for capital repayment element).

Do you think a 75k minimum salary for raising a repayment mortgage is a good thing? That's clearly a logical next step. Even if you don't apply an increase in respect of the capital element and set it at the same £50k minimum for repayment that would leave the vast majority of the country unable to raise any kind of mortgage irrespective of deposit (of course though that would have a downward effect on pricing - which is I think what we all want).

The problem isn't IO, its irresponsible lending (and borrowing). That applies to both IO and repayment. 50k makes no sense.

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[quote name='shindigger' timestamp='1332881182' post='909001358']
That system is bust. So IO is a HUGE problem my friend. Huge. What do you think all these buyers since the early Noughties have been saying on their forms? One of my best friends bullshitted an RBS IO loan.
He borrowed £145k with a £7k deposit. His flat is now at least £20k under water, and hes not cleared a penny. Hes ******ed.
[b]And its not flahsing red on ANY RBS terminal anywhere yet.[/b] They will never see the money back. His plan ( im not sure he even had a plan) of capital growth to clear the loan has failed. As it will with thousands, maybe millions, of others, in time.
I'd say this applies to a sizeable chunk of loans since 2004/5.

Tick tock.
[/quote]

Indeed.

IMO a risk manager returning to the mortgage lending department of a UK retail bank after a 30 year coma would have some kind of Charlton Heston-Planet of the Apes-Statue of Liberty moment.

[media]http://cli.ps/Y72BL[/media]


The man in the street thinks that the banks are crafty and are getting rich. BS. The banks were "getting high on their own supply", and a dealer needs to stay clean!

[quote]
They will never see the money back.
[/quote]

+1

We will try to inflate away these debts, because they are not going to be paid back.

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[quote name='Ascii' timestamp='1332887500' post='909001422']
Not checking facts would of course be a risky investment.

No idea - but if the banks haven't checked then that would be a fairly clear indication of negligence which of course opens up a very clear path to the risk that you won't recover your loan.


Very probably so,but again that's clearly negligent lending and also fraudulent borrowing. If both lender and borrower are sensible IO has its place and is both a viable lending mechanism and one which can suit both lender and borrower. A 50k minimum earning limit makes no sense as is just a knee jerk reaction. You may as well say that there is a 75k minimum salary for a repayment mortgage (allowing an extra 50% for capital repayment element).

Do you think a 75k minimum salary for raising a repayment mortgage is a good thing? That's clearly a logical next step. Even if you don't apply an increase in respect of the capital element and set it at the same £50k minimum for repayment that would leave the vast majority of the country unable to raise any kind of mortgage irrespective of deposit (of course though that would have a downward effect on pricing - which is I think what we all want).

The problem isn't IO, its irresponsible lending (and borrowing). That applies to both IO and repayment. 50k makes no sense.
[/quote]


Fraudulent. Negligent. Yeah probably.
Problematic? Certainly.

You aint seen nothin yet.
I would say we are still very much a nation of renters. :) Edited by shindigger

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[quote name='ChairmanOfTheBored' timestamp='1332888103' post='909001429']
Indeed.

IMO a risk manager returning to the mortgage lending department of a UK retail bank after a 30 year coma would have some kind of Charlton Heston-Planet of the Apes-Statue of Liberty moment.

[media]http://cli.ps/Y72BL[/media]


The man in the street thinks that the banks are crafty and are getting rich. BS. The banks were "getting high on their own supply", and a dealer needs to stay clean!



+1

We will try to inflate away these debts, because they are not going to be paid back.
[/quote]


Awesome scene.

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[quote name='Ascii' timestamp='1332876969' post='909001312']
I can't make any sense of that to be fair. To arbitrarily set a minimum income of £50k is slightly odd.

I suppose they're basing it on people leveraging heavily but I would have thought that restricting by deposit size would achieve that adequately, after all if you have 50k deposit and a 50k mortgage neither repayment nor interest payments should present a problem for most. Of course 100k wouldn't buy you much now.

I think I would have to draw from that a tacit implication that a jump in interest rates is expected, ie we expect to you be able to cover the interest if much larger than it is now, and the larger deposit will mean we still have an asset to repay the outstanding loan when interest rates jump and we have to foreclose.
[/quote]

Your LTV argument makes perfect sense - if LTV is the issue, restrict LTV and the banks get an equity cushion against HPC.

I'm not so sure about the interest argument - normal mutiple (3.5x - 5x) policies would cover this because, presumably as your gross income increases, your disposable income increases in proportion, and thus your ability to soak up interest rate spikes.

If I was betting my own money, I would see this as a sign saying "If your name's not on the list, your not coming in". It could be a sign that there are a lot of people looking to refinance IO mortgages and it is just a way of saying, "Don't bother filling out our form, no more nonsense IO lending here", and trimming the trivial processing cost of dealing with, and refusing, the applications.

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[quote name='ChairmanOfTheBored' timestamp='1332889961' post='909001453']
If I was betting my own money, I would see this as a sign saying "If your name's not on the list, your not coming in". It could be a sign that there are a lot of people looking to refinance IO mortgages and it is just a way of saying, "Don't bother filling out our form, no more nonsense IO lending here", and trimming the trivial processing cost of dealing with, and refusing, the applications.
[/quote]

this is the thing i'm trying to find out, if you currently have a IO mortgage that fall out of the terms, will the bank treat your re-mortgage as a new application? will the same restrictions apply?

if the answer is yes, then that IS going to have massive reprecussions on the mortgage market over the next 12 to 18 months as peoples existing deals come to an end.

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[quote]Earlier this month, the Financial Services Authority (FSA) warned that some borrowers aged in their late 50s who are currently on interest-only deals face a "ticking time bomb" whereby they could be unable to remortgage.[/quote]

[quote]An estimated £120 billion of interest-only mortgage loans generally which have already been taken out are due for repayment over the next 10 years, presenting a "significant challenge" for lenders and consumers, the FSA estimated in its Mortgage Market Review published last year. [/quote]

[img]http://www.thelemonpress.co.uk/wp-content/uploads/2011/03/head-in-sand.jpg[/img]

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HSBC told me I need an income of £30k p.a. for an interest only mortgage. I thought that was high! This is despite me only wanting to potentially borrow £30k (about 20% of a purchase price), AND having policies that pay out in 2013 that will cover it. Computer says no.

The so-called mortgage arrangers working in high street banks are nothing of the sort. They are the front people and despite posh titles like 'advisors' and 'planners', they follow the guidelines of the computer programmes written at head office. Incidentally, although it doesn't state as much on their website, you need to have £15k p.a. to get a repayment mortgage. They basically don't want to lend to low-earners. Peasants the lot of them. :unsure:

When I explained that I had 80% deposit, they agreed I was a low risk but thrt it would have to be submitted to the underwriters in London because, the computer in the branch said no.

Tip to others, don't forget to include interest on savings as 'income,' it helps. This is despite the fact it disappears after you've used the capital to buy. :rolleyes:

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I think the reason for the removal of IO mortgages is so they can let the air out of the bubble slowly.

The banks don't want people with negative equity on their books. so house prices falling at the same rate as people are paying off their loans is what is being engineered here.

I understand that some company’s only allow IO mortgages if you have got 50% equity these people have a low chance of falling into negative equity.

The reason for the £50,000 earnings may be so the banks executives (who have made the decision) are sill able to borrow IO and not be criticised in the media for it. fat cats rule for one type story's.

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[quote name='ccc' timestamp='1332877412' post='909001319']
As many have said time and time again. Patience is key. And I have to say - recently just about EVERYTHING points to serious large falls in property prices in nearly all of the UK in the next few years. IMO anyway.
[/quote]

For the first time in a while I'm feeling optimistic.

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