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


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#1 Dave Beans

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Posted 15 March 2012 - 02:55 AM

http://www.dailymail...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, 15 March 2012 - 02:56 AM.

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#2 Debbie568

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Posted 15 March 2012 - 03:23 AM

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


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?

#3 Mr. Miyagi

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Posted 15 March 2012 - 06:15 AM

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#4 ChairmanOfTheBored

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Posted 15 March 2012 - 07:24 AM

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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#5 libspero

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Posted 15 March 2012 - 07:39 AM

I wouldn't be surprised if half of these are 'unofficial' BTL mortgages..

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#6 gf3

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Posted 15 March 2012 - 07:55 AM

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.

#7 buckers

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Posted 15 March 2012 - 08:03 AM

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

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Posted 15 March 2012 - 08:17 AM

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...
Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
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#9 satch

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Posted 15 March 2012 - 08:36 AM

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.
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.

#10 fluffy666

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Posted 15 March 2012 - 08:36 AM

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.

#11 JustAnotherProle

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Posted 15 March 2012 - 08:40 AM

‘Lenders are attuned to this issue and will treat borrowers sympathetically.’


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#12 gf3

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Posted 15 March 2012 - 08:42 AM

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.

#13 funinhounslow

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Posted 15 March 2012 - 08:58 AM

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.

#14 Bloo Loo

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Posted 15 March 2012 - 09:04 AM

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, 15 March 2012 - 09:06 AM.

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#15 interestrateripoff

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Posted 15 March 2012 - 09:16 AM

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.
Proof that Brown had repeated IMF / OECD / BIS warnings over house prices and did nothing!!!
Looting: The Economic Underworld Of Bankruptcy For Profit
The exponential growth of debt and the unsustainability of debt
The logic of HPI @ 10% YoY means your £100k house would be worth £1.38bn in 100 years
Paying down my mortgage with money found on the street

It's time to sue the Bank of England / Federal Reserve for GROSS NEGLIGENCE
If DEBT is the problem REPAYMENT is the solution or you default

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New digest on the credit crisis and economy Part2 Part 3

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