Thursday, Oct 30, 2008
A welcome return for prudence
FT: Interest-only mortgages blocked
Debt charities have accused banks of failing to uphold Gordon Brown’s promise that repossession would be a ”last resort” for insolvent homeowners. Cheltenham & Gloucester, part of Lloyds TSB, has attracted criticism by announcing that borrowers cannot move from repayment mortgages to interest only loans, which offer lower monthly payments. However estate agents and brokers said restricting interest only loans was prudent. Falling house prices mean borrowers who do not reduce the size of their loan through repayment mortgages are at risk of negative equity and could have difficulty refinancing their property in the future.
Posted by musn't grumble @ 05:09 PM (585 views) Add Comment
16 Comments
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1. japanese uncle said...
It must be outlawed straight away, along with all derivative transactions not wanted by the real economy.
2. malct said...
hey prudence! - here's a tip
Infamous Quote from Vladimir Ilyich Lenin
"The way to crush the bourgeoisie is to grind them
between the millstones of taxation and inflation."
3. mountain goat said...
There are situations where an interest only mortgage is appropriate IMO. If someone has a good credit history and has been paying their mortgage consistently, and is not in danger of negative equity if house prices fall a further 15%, but now loses his job in this downturn, for example.
4. jack c said...
This was debated yesterday under the Times article - mountain goat makes a valid point
He's a re-post
Going back to my original post earlier today (which was primarily in respect of C&G/LTSB mortgages that are already in place - not new borrowers) - if a borrower runs into financial difficulty one of the standard options would be for the lender to allow a switch to interest only payments and possibly to extend the term of the mortgage thus reducing monthly payments. Prior to attempting to take posession of a property all lenders must demonstrate that all reasonable steps have been taken to avoid evicting the borrower which is always seen as a last resort. If LTSB fail to allow the IO option in such circumstances it will very likely be thrown out by the judge at the court proceedings stage. The FSA have inplememented TCF (Treating Customers Fairly)
As for IO with no repayment vehicle at all from outset - should never ever have been allowed and was always going to end in disaster for all concerned.
Wednesday, October 29, 2008 09:02PM
5. malct said...
4. jack c said...
This was debated yesterday under the Times article - mountain goat makes a valid point
He's a re-post
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
Jack, I thought we'd left all the name calling behind !
Have you got Nemo'sSub working yet?
6. malct said...
which reminds me - where is nooneo'
nooneo, nooneo, where for art thou nooneo?
7. mountain goat said...
nice one Malct !
8. Fjcruiser said...
IO mortages have contributed largely to property price inflation. Of course for those coming out of fixed deal and unable to afford the increase, IO mortgages is the only solution. I do feel though that new IO mortgages should be banned. They were mainly directed at young people and the old which in my view are the most vulnerable.
9. jack c said...
Wish we had an edit facility
10. malct said...
7. mountain goat said...
nice one Malct !
Thursday, October 30, 2008 06:02PM
as a designer printer, proof checking was a big part of my job
butt ime justas baad as evryoneo elsey at tie poes
jack c 'I love you'
11. malct said...
oops I meant jack c I love you ------------- re sense of huemore
Hey I calne t even spell displexio - a
right I'm off now never to return
unless LP starts shouting hurrah
12. malct said...
jack c - help me out he - I have to serve dinner
13. braindeed said...
Another way of putting it – do we save the foolishly overstretched, and beggar the prudent saving FTB’s who are saving and awaiting the day that their deposit is enough?
Or do we allow the fabled ‘markets’ to find their own levels – guess which I’d prefer?
14. inbreda said...
3. mountain goat said...
There are situations where an interest only mortgage is appropriate IMO. If someone has a good credit history and has been paying their mortgage consistently, and is not in danger of negative equity if house prices fall a further 15%, but now loses his job in this downturn, for example.
Not sure how interest only would help. If someone loses their job (unless they have savings - unlikely) they are not actually able to afford repayment, interest only or in fact anything else. It might delay repossession by a week or two if they're lucky
15. Whostolemyendowment said...
What about those of us who still have endowment mortgages ( = ball and chain)? Interest only mortgage with the capital of the loan backed by a with-life policy....
When we wish to sell and then buy again....will we still get an interest only mortgage offer? Academic really as my endowment will suffer a large shortfall anyway...so next time I mortgage it will be a repayment one I guess, and my endowment can be my rather small nest egg.
16. malct said...
15. Whostolemyendowment said...
What about those of us who still have endowment mortgages ( = ball and chain)?
SELL SELL SELL