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Interest-Only Timebomb... Today's Times Page #2


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#1 dryrot

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Posted 10 April 2012 - 10:38 AM

Hi

article of Page 2 of today's Times - can't get past firewall (can anyone post it?). Many related articles though:

http://www.telegraph...ng-already.html

"the regulator discovered that 30pc of new mortgages taken out between 2007 and the first quarter of 2010 were interest-only. "


http://www.ftadviser...CN/article.html

etc.
Fionnuala Earley, chief economist, www.nationwide.co.uk, 31/10/07: “Homeowners may well need to content themselves with less spectacular returns on their houses over the next decade.”

#2 thecrashingisles

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Posted 10 April 2012 - 10:40 AM

"the regulator discovered that 30pc of new mortgages taken out between 2007 and the first quarter of 2010 were interest-only. "


Shocking. If they carry on like this, soon the regulator will discover that there's been a housing bubble.

#3 bland unsight

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Posted 10 April 2012 - 10:54 AM

article of Page 2 of today's Times - can't get past firewall (can anyone post it?). Many related articles though:


This story, which keeps bobbing up and is quite alarming is based on this graph from the FSA second Mortgage Market Review consultation paper, which was published in December 2011.


Posted Image

More detail on this thread - http://www.housepric...howtopic=176420
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#4 rantnrave

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Posted 10 April 2012 - 10:56 AM

Shocking. If they carry on like this, soon the regulator will discover that there's been a housing bubble.


:lol:

They can then notify Stephanie Flanders

#5 madpenguin

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Posted 10 April 2012 - 10:57 AM

This story, which keeps bobbing up and is quite alarming is based on this graph from the FSA second Mortgage Market Review consultation paper, which was published in December 2011.


Posted Image

More detail on this thread - http://www.housepric...howtopic=176420



2030 eh?, so just as we're likely recovering from the current crisis, boom!

Edited by madpenguin, 10 April 2012 - 10:58 AM.


#6 The Masked Tulip

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Posted 10 April 2012 - 10:58 AM

:lol:

They can then notify Stephanie Flanders



Go for it.

Edited by The Masked Tulip, 10 April 2012 - 10:58 AM.

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#7 pokercola

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Posted 10 April 2012 - 11:04 AM

I have said it before, and I will say it again;in 10 - 15 years we will see a flurry of cases from IO mortgage holders against the banks. The sun will be running articles about how 'poor families who have never missed a mortgage payment are being forced out of their homes by the evil bankers' (despite the yearly statements and key features document explaining that, they are only paying interest)

Chazney and Gareth will say that they were confused by all these overly complicated financial terms like 'interest' and 'capital'. They just wanted to be on the ladder! A series of test cases will fail but then someone will appeal and take the banks to the high court. There a judge will rule that it was unfair of the banks to offer these in the first place and everyone can keep their houses, maybe with some compensation for the distress?

#8 bland unsight

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Posted 10 April 2012 - 11:18 AM

I have said it before, and I will say it again;in 10 - 15 years we will see a flurry of cases from IO mortgage holders against the banks. The sun will be running articles about how 'poor families who have never missed a mortgage payment are being forced out of their homes by the evil bankers' (despite the yearly statements and key features document explaining that, they are only paying interest)

Chazney and Gareth will say that they were confused by all these overly complicated financial terms like 'interest' and 'capital'. They just wanted to be on the ladder! A series of test cases will fail but then someone will appeal and take the banks to the high court. There a judge will rule that it was unfair of the banks to offer these in the first place and everyone can keep their houses, maybe with some compensation for the distress?


These mortgage are never going to make it to 2030. Many of them will be the worst of the worst: high-LTV and self-certified, (i.e. liar loans). Even for the handful that keep up the IO payments, the government are going to oblige lenders to check for a repayment vehicle and where none exists they are going to push the borrowers onto repayment, where that is unaffordable, they are going to make them sell.

More importantly, this is a not just an ordinary time-bomb - it is a time-bomb that ticks faster when mortgage rates go up, and mortgage rates are going up. Interest only payments are far more sensitive to changes in the interest rate paid on the loan, for obvious reasons.
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#9 8 year itch

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Posted 10 April 2012 - 11:23 AM

"the regulator discovered that 30pc of new mortgages taken out between 2007 and the first quarter of 2010 were interest-only. "

1st quarter 2010 is an interesting mark in the sand. I wonder if there was a dramatic change afterwards? If so, why might that have happened?

There is no ladder.

JY


No need to sell up, the next phase of the economics cycle is going to be very positive for anyone that owns property.

All I'm sayings is, don't listen to the property bears people, they are wrong.


#10 Monkey

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Posted 10 April 2012 - 11:26 AM

I have said it before, and I will say it again;in 10 - 15 years we will see a flurry of cases from IO mortgage holders against the banks. The sun will be running articles about how 'poor families who have never missed a mortgage payment are being forced out of their homes by the evil bankers' (despite the yearly statements and key features document explaining that, they are only paying interest)


10-15 months more like, alot of people got 2, 3 and 5 year deals since 2008, and these matured or are due ot mature nowish. with the banks saying you need 50% equity or £50k income to have a IO deal and or putting up IR's as well as forcing many IO'ers on to the SVR. its not going to happen enmass untill after June, but it will happen

#11 RufflesTheGuineaPig

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Posted 10 April 2012 - 11:27 AM

These mortgage are never going to make it to 2030. Many of them will be the worst of the worst: high-LTV and self-certified, (i.e. liar loans). Even for the handful that keep up the IO payments, the government are going to oblige lenders to check for a repayment vehicle and where none exists they are going to push the borrowers onto repayment, where that is unaffordable, they are going to make them sell.

More importantly, this is a not just an ordinary time-bomb - it is a time-bomb that ticks faster when mortgage rates go up, and mortgage rates are going up. Interest only payments are far more sensitive to changes in the interest rate paid on the loan, for obvious reasons.


+1
It's time to pay the piper. There is no magician who will magic away the debt. Someone is going to have to pay it. Bend over and prepare to make payment.

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#12 dryrot

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Posted 10 April 2012 - 11:44 AM

This story, which keeps bobbing up and is quite alarming is based on this graph from the FSA second Mortgage Market Review consultation paper[/url], which was published in December 2011.

More detail on this thread - http://www.housepric...howtopic=176420

Thanks for this. I checked the last two pages of hpc and no matching thread.

Note this story is now a major full-page story - "Thousands Face Mortgage Time-bomb" - on page 3 of the Times today. MSM bear-food indeed. Also mentions that i/o "forbearance" loans are propping up the market and reducing repos.

Edited by dryrot, 10 April 2012 - 11:44 AM.

Fionnuala Earley, chief economist, www.nationwide.co.uk, 31/10/07: “Homeowners may well need to content themselves with less spectacular returns on their houses over the next decade.”

#13 Georgia O'Keeffe

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Posted 10 April 2012 - 11:51 AM

This story, which keeps bobbing up and is quite alarming is based on this graph from the FSA second Mortgage Market Review consultation paper, which was published in December 2011.


Posted Image

More detail on this thread - http://www.housepric...howtopic=176420

seems a bit of a nonsense scare story, what it doesnt take into account is that as houseprices in the UK double every seven years* by the middle of the bulk of expiries the debt will only be 25% of the loan so not an issue at all really.

*Except Maidstone which tends to treble over the same time period

Edited by Georgia O'Keeffe, 10 April 2012 - 11:53 AM.


#14 juvenal

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Posted 10 April 2012 - 11:59 AM

seems a bit of a nonsense scare story, what it doesnt take into account is that as houseprices in the UK double every seven years* by the middle of the bulk of expiries the debt will only be 25% of the loan so not an issue at all really.

*Except Maidstone which tends to treble over the same time period


Please stop trying to talk the Maidstone market down..
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#15 Sour Mash

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Posted 10 April 2012 - 12:01 PM

I guess you can't blame people for following the government's lead on borrowing ... i.e. Don't worry about ever paying it back as we will just roll over the debt (or 'something' will come up to save our bacon) and everything will be OK as long as the interest rate is low.

Plus ça change, plus c'est la même chose




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