interestrateripoff Posted August 21, 2009 Share Posted August 21, 2009 http://www.timesonline.co.uk/tol/money/pro...icle6804683.ece Many of the four million homeowners who took out interest-only mortgages are facing a crisis because they have no way of repaying their home loans.Figures from the Financial Services Authority, which has regulated mortgages since 2004, show that 38 per cent of Britain’s 11.1 million homeowners — or more than one in three — may have made inadequate provision to pay off their capital sum. Many are in negative equity and the savings products taken out to cover the capital repayments have fallen short. That 38 per cent figure does not include those with endowments or buy-to-let investors who took out interest-only mortgages to keep the cost down. Experts said that homeowners who pinned their hopes on their house covering the cost of paying off the mortgage were most at risk after house price falls of 22 per cent from peak to trough, according to figures from Halifax. A spokesman for the FSA said: “At the top of the market it was the case that for a lot of borrowers, interestonly was the only way they could afford to buy. For these borrowers it becomes increasingly difficult to pay off the capital as time goes on.†A spokeswoman for the Council of Mortgage Lenders said that at the moment homeowners cannot rely on house-price inflation to cover the capital repayment. “They will have fewer options available if they get into difficulty, as switching to interest-only is a coping strategy when you have payment problems.†Interest-only deals first appeared in the early eighties alongside endowment policies. Endowment mis-selling in the late eighties brought an end to their common use as a repayment vehicle but the concept of interest- only remained. About 40 per cent of borrowers on interest-only deals took them out before 2003, according to moneysupermarket.com, although there was a surge in applications in 2006 and 2007, as house prices rose. Ray Boulger, of John Charcol, the mortgage broker, said: “We need to worry about those who have taken out interest-only loans but not thought through how they will pay it back.†Why did no one predict this on here? Why is this the first I'm hearing about this!!!! Which idiot thought interest only where a good idea, sorry that was a banker who developed the product wasn't it. Thanks god the FSA and BoE intervened to stop this from ever happening, it's all a nightmare no one would have been this stupid. At least we never did subprime. This country is run by imbeciles. And interest only deals inflated house prices by how much? I bet no one does a study on that question. Quote Link to comment Share on other sites More sharing options...
Guest KingCharles1st Posted August 21, 2009 Share Posted August 21, 2009 Just another price the country paid for supporting Brown and all the rest of the T W A T S who sold them so many lies.. Quote Link to comment Share on other sites More sharing options...
1929crash Posted August 21, 2009 Share Posted August 21, 2009 I never could see the point of an interest only mortgage. Can someone enlighten me? Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted August 21, 2009 Author Share Posted August 21, 2009 I never could see the point of an interest only mortgage. Can someone enlighten me? It allowed you to buy at the peak of the market. If this was your only option wouldn't you take it or are you some kind of fool? Quote Link to comment Share on other sites More sharing options...
Umiapik Posted August 21, 2009 Share Posted August 21, 2009 Ray Boulger, of John Charcol, the mortgage broker, said: “We need to worry about those who have taken out interest-only loans but not thought through how they will pay it back.†Why, exactly are we supposed to be worrying about these morons?? Did he mean to say: "We need to point and laugh at?" Quote Link to comment Share on other sites More sharing options...
Tonkers Posted August 21, 2009 Share Posted August 21, 2009 When I was offered a fabulous 125% Northern Rock together mortgage, interest only, repayment of capital wasn't even mentioned. (i did this for research purposes to work out what was going on, before I found this site). I felt physically sick at the realisation that this was what people were doing. Flat on at £126K, bought the year before for £110K, maximum rental value £450pm. If you went for that in 2007 you are up to your neck in doo doo right now. Ave wage round the area must be about 16/18K (Somerset). Quote Link to comment Share on other sites More sharing options...
papag Posted August 21, 2009 Share Posted August 21, 2009 Along with the bank rate tracker mortgages that are coming to an end every day now the fuse is well and truly lit. Quote Link to comment Share on other sites More sharing options...
fluffy666 Posted August 21, 2009 Share Posted August 21, 2009 A spokeswoman for the Council of Mortgage Lenders said that at the moment homeowners cannot rely on house-price inflation to cover the capital repayment. The stupid, it burns.. The only time you could even consider taking an IO mortgage would be when inflation was high. Quote Link to comment Share on other sites More sharing options...
1929crash Posted August 21, 2009 Share Posted August 21, 2009 It allowed you to buy at the peak of the market. If this was your only option wouldn't you take it or are you some kind of fool? I am a fool, obviously. Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted August 21, 2009 Author Share Posted August 21, 2009 I am a fool, obviously. I've long thought that. Clearly too many people out there are idiots and just want to live the dream at any cost. Why the hell banks thought these where a long term idea is beyond me, clearly the short term profits blinded them. Although it appears with little risk to the business and the fairy taxpayer comes to the rescue. Quote Link to comment Share on other sites More sharing options...
scottbeard Posted August 21, 2009 Share Posted August 21, 2009 I never could see the point of an interest only mortgage. Can someone enlighten me? I buy a £100k house on 100% IO mortgage. Two years later when the cheap deal expires I sell it for £120k, having made £20k from nothing at the cost of just 2 yrs interest. Works a treat....when prices are rising 10%pa. Quote Link to comment Share on other sites More sharing options...
eric pebble Posted August 21, 2009 Share Posted August 21, 2009 Ave wage round the area must be about 16/18K (Somerset). Nope.... £12k is considered "high"..... Quote Link to comment Share on other sites More sharing options...
1929crash Posted August 21, 2009 Share Posted August 21, 2009 I buy a £100k house on 100% IO mortgage.Two years later when the cheap deal expires I sell it for £120k, having made £20k from nothing at the cost of just 2 yrs interest. Works a treat....when prices are rising 10%pa. Thank you. Quote Link to comment Share on other sites More sharing options...
dryrot Posted August 21, 2009 Share Posted August 21, 2009 (edited) I buy a £100k house on 100% IO mortgage.Two years later when the cheap deal expires I sell it for £120k, having made £20k from nothing at the cost of just 2 yrs interest. Works a treat....when prices are rising 10%pa. "Let’s Do the Ponzi Flip!" My first post on hpc! Almost 2 years to the day! http://www.housepricecrash.co.uk/forum/ind...aded&start= Edited August 21, 2009 by dryrot Quote Link to comment Share on other sites More sharing options...
ken_ichikawa Posted August 21, 2009 Share Posted August 21, 2009 I never could see the point of an interest only mortgage. Can someone enlighten me? They did work for some people...... for a while , Michelle P 2 work places ago bought a house IO , bought tons of stuff and ran up massive CC debts , then used the increasing house prices to wipe clean the slate, last I heard from her was end of 2007 where she had again a massive amount of debt and wanted no needed to sell the house and use the capital appreciation to pay off the debt..... I always wondered in my first initial weeks at that firm how she could afford a new car , multiple big screen TVs new phones and multiple Xboxes (I asked her why she 'needed' more than one) .....since she was a secretary on min wage , she did progress in a new company up to accounts team , which is probably worse as it means she does not have the option of bankruptcy. Quote Link to comment Share on other sites More sharing options...
Tonkers Posted August 21, 2009 Share Posted August 21, 2009 Nope.... £12k is considered "high"..... I thought it may be a little higher as they have the Clarkes factory in Street. they are quite dependent on one major employer there. Quote Link to comment Share on other sites More sharing options...
no-way Posted August 21, 2009 Share Posted August 21, 2009 isnt an IO mortgage just free equity in a rising property market? thats the only reason i can see for having one, or maybe if you know you have got a wad of money coming to you in the future (inheritance etc) Quote Link to comment Share on other sites More sharing options...
Guest KingCharles1st Posted August 21, 2009 Share Posted August 21, 2009 (edited) isnt an IO mortgage just free equity in a rising property market?thats the only reason i can see for having one, or maybe if you know you have got a wad of money coming to you in the future (inheritance etc) I think with the i.o. deal, it appealed to quite a few people who just thought- "f-uck it, if I CANT handle the payments- I just walk away, maybe I go bankrupt, maybe I don't..at that point I'll be past caring.." And I can't really say I blame those people, because without an i.o. mortgage they were sleeping in their cars anyhow. Edited August 21, 2009 by KingCharles1st Quote Link to comment Share on other sites More sharing options...
Greg Bowman Posted August 21, 2009 Share Posted August 21, 2009 I thought it may be a little higher as they have the Clarkes factory in Street. they are quite dependent on one major employer there. Clarkes Museum more or less just design and shop left I think. Quote Link to comment Share on other sites More sharing options...
mylipsaresealed Posted August 21, 2009 Share Posted August 21, 2009 Or as my boss always tells me (millionaire) anyone that takes a repayment mortgage is stupid he says why be bound by how much you have to pay each month. He says take out an IO mortgage and make sure you can overpay at the same amount or more each month, when things get tight one month just pay the IO amount that way you're not held to ransome by the bank - got to say quite a good idea although i would always make sure i had a repaymeny mortgage! Quote Link to comment Share on other sites More sharing options...
athom Posted August 21, 2009 Share Posted August 21, 2009 http://www.timesonline.co.uk/tol/money/pro...icle6804683.eceafter house price falls of 22 per cent from peak to trough As an aside i notice they are talking about the HPC in past tense now. I feel this is the most effective way of ramping the economy. It's just the accepted wisdom that the trough has passed..... Quote Link to comment Share on other sites More sharing options...
teef Posted August 21, 2009 Share Posted August 21, 2009 IO mortgages might work out quite well as mortgage debt will be inflated away - same as government debt. Does anybody seriously believe inflation is 2% - your own experience tells you it's more like 5-10%. Having said this I paid off my mortgage as soon as I could - it's a risk relying on inflation to do it for you. Quote Link to comment Share on other sites More sharing options...
athom Posted August 21, 2009 Share Posted August 21, 2009 IO mortgages might work out quite well as mortgage debt will be inflated away - same as government debt. Does anybody seriously believe inflation is 2% - your own experience tells you it's more like 5-10%. Having said this I paid off my mortgage as soon as I could - it's a risk relying on inflation to do it for you. Surely inflation will only pay off your mortgage if wages are inflating. At the moment wages seem to be the only thing that isn't inflating. Quote Link to comment Share on other sites More sharing options...
athom Posted August 21, 2009 Share Posted August 21, 2009 Why, exactly are we supposed to be worrying about these morons?? Did he mean to say: "We need to point and laugh at?" exactly because we'll end up paying for their screw up Quote Link to comment Share on other sites More sharing options...
Democorruptcy Posted August 21, 2009 Share Posted August 21, 2009 Surely Labour won't allow anyone in debt to have any problems? This is nothing a quick new tax cannot solve. Something along the lines of a "1% divert tax". Interest on savings income is diverted into the accounts of people on interest ony mortgages. Labour can setup a few thousand new jobs to do the divert work even though it only requires only a few hundred. Job done. Unemployment solved, debtors happy, savers should just be happy they are still alive. Quote Link to comment Share on other sites More sharing options...
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