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The Masked Tulip

Homeowners With Interest-only Mortgages Face Repayment Crisis As Property Prices Plunge

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Homeowners with interest-only mortgages face repayment crisis as property prices plunge

Millions of middle-class families are in danger of being unable to move home after they gambled their futures on interest-only mortgages.

Four out of ten households have taken out the mortgages, according to figures from the Financial Services Authority.

Many expected that the increase in property prices would help them to pay off their loans.

But with houses having lost almost a quarter of their value in the last two years, an estimated 4.2million homeowners have to confront the prospect that they may not be able to move for many years.

Among the hardest hit will be those needing to move to take up a new job, or trade up to a larger house because their family has outgrown the current one.

Banks and building societies will be unwilling to give them a new loan because they have had any deposit eaten away by falling prices and have never attempted to repay any of the capital on their previous loan.

To compound the problems caused by falling property prices, the credit crunch has left thousands of white-collar workers unemployed and millions facing a pay freeze, so they have little chance of increasing their mortgage payments.

Ed Stansfield, from economic forecaster Capital Economics, said: 'With prices having fallen as much as they have already many homeowners will find that they simply won't be able to move home.

Read more: http://www.dailymail.co.uk/news/article-12...l#ixzz0OrXokaQk

Anyone know of a property that has fallen by 25 percent? No, me neither.

Eric do not read the above article as I fear you may have an orgasm and then your head will explode!

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China has been buying debt of "Pigs" using US Bonds (Snigger) thus off loading Us debt & gaining a foothold in Euroland. I notice that we are @ .87 to the Euro, i suspect we see 1:1 by Feb 2010.

A Bloodbath is coming, just hope Gordon is still in number 10...............

Funny thing, i was chatting to a contact today whom tells me all the leasehire Mercs & Bmw's are getting dumped. A mixture of cost & it no longer "Cool" to have one. Am told Company carparks are starting to fill with Toyota Prius !

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Eric do not read the above article as I fear you may have an orgasm and then your head will explode!

I would have thought that the story about C & G liar loans would already have elicited that reaction.

I fear that as the number of OOs with IO mortgage predicaments increases, we're going to be hearing a lot more from whining would-be Rosie Millards who got their sums wrong in the media.

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How was rising property prices ever going to pay off their mortgages in a low wage inflation era?

You let house prices rise another 100% in London, sell the house pay off the mortgage and use the new found equity to buy a cheaper house, probably in the provinces. Yes it was a cr@p plan but apparently lots of people bought into it.

Edited by AndyAndy

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Homeowners with interest-only mortgages face repayment crisis as property prices plunge

Anyone know of a property that has fallen by 25 percent? No, me neither.

Eric do not read the above article as I fear you may have an orgasm and then your head will explode!

Banks when accounting for their assets use mark to model.

Banks when asking for a deposit on an asset use mark to market.

i.e. ensuring that all future transaction have a safety cushion whilst falsifying their current position.

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Millions of middle-class families are in danger of being unable to move home after they gambled their futures on interest-only mortgages.

Says it all really. Gambling spivs the lot of them.

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Banks when accounting for their assets use mark to model.

Banks when asking for a deposit on an asset use mark to market.

i.e. ensuring that all future transaction have a safety cushion whilst falsifying their current position.

I know loads of properties that sold this year at 25% off and its confirmed by LR.

2005 Q3 205000

2007 Q3 245000

2009 Q2 185000

Just wait for new LR figures it will make interesting reading.

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Millions of middle-class families are in danger of being unable to move home after they gambled their futures on interest-only mortgages.

Says it all really. Gambling spivs the lot of them.

The freedom of slaves is measured by the length of their chains. ;)

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How was rising property prices ever going to pay off their mortgages in a low wage inflation era?

well... it would certainly enable them, to, er, take out a new mortgage in order to pay off the old one. which is progress of sorts, i suppose.

no, i mean, it obviously only makes sense if there's a plan to downsize, but as daily mail financial illiteracy goes, it isn't all that bad, certianly more sensible than the risible yet oft-trotted out that rampant HPI benefits all home owners and quite possibly the entire populace.

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You let house prices rise another 100% in London, sell the house pay off the mortgage and use the new found equity to buy a cheaper house, probably in the provinces. Yes it was a cr@p plan but apparently lots of people bought into it.

It was a flawless plan in the economic paradigm of house prices only ever go up.

By yourself a large family home, live in it for 25 years with a IO mortgage and then sell up at the end when the kids go and buy smaller.

However I would love to know what sort of property there kids would be able to buy in this sort of plan as they might discover the kids don't move out, there downsizing isn't an option.

The other way out of this is that in 25 years wages would have increased and paying off the loan would only take several years. If you had bought a house say in 1985 with a IO mortgage and your term was up next year how long would it take you to pay off the mortgage with today's wages?

Again this plan assumes things only ever go up.

Historical challenge for someone, if you had bought a house in 1907 in the US had a IO mortgage would 1932 wages quickly pay off the capital? Providing of course you remained employed.

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Jeez, 40% of households on IO mortgages with record low interest rates - no wonder retail is up!

So to boost the economy then the best option would be to force everyone onto IO mortgages and get people spending.

I'll forward this solution onto Ponzi Brown immediately you've just saved the world.

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The only way out is 9% pay rises per year...like the olden days, the problem arose when the wage rises stabilized but the credit and houses carried on rising, we now are competing with the rest of the world and all have a part to play to correct the mess made for our future generations.

We need to come down to earth, the reset button has been pressed. ;)

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