Jump to content
House Price Crash Forum
TeddyBear

Home"owners" To Be Moved Off Io Interest Rates

Recommended Posts

Haven't seen this one posted yet...

http://www.telegraph.co.uk/finance/personalfinance/7982810/Home-owners-to-be-moved-off-interest-only-mortgages.html

Santander is one of several high street lenders which have introduced the new rules for borrowers with interest-only deals. Halifax is also understood to applied changes.

Borrowers without sufficient equity in their homes are being moved onto repayment deals once their initial deal has come to an end. ...

Am surprised to see this, I thought they would be letting people stay on IO. Wonder if they will start doing new valuations when people come off fixed deals?

Share this post


Link to post
Share on other sites

Haven't seen this one posted yet...

http://www.telegraph.co.uk/finance/personalfinance/7982810/Home-owners-to-be-moved-off-interest-only-mortgages.html

Am surprised to see this, I thought they would be letting people stay on IO. Wonder if they will start doing new valuations when people come off fixed deals?

Attempt to build up some equity to cover the banker's arses when property prices fall - get the borrower with more (or some!) skin in the game.

Share this post


Link to post
Share on other sites

I really hope this applies to my ex landlord. He was leading the life of riley on an I/O loan for over £270k. Cost to him, just over £200 a month!! You couldn't rent a room for that. Outrageous!

Share this post


Link to post
Share on other sites

Further on in the article it says that this will happen to people with less than 25% equity - so this seems to be the drop they want to cushion against.

IO and less than 25% equity. Flat house prices mean that for 25% equity you would have had to put down 25% deposit, as no capital repayment has taken place. I would think that 5-10% deposit was required for these, which means to get 25% equity means HPI of 15-20% since mortgage inception. This imlpies that most IO mortgages with 25% equity were taken out when houe prices were around 20% lower than here, which is 2003 (ish?). As a result, I would posit that most IO mortgages taken out after 2003 probably don't meet the criteria (yikes).

Share this post


Link to post
Share on other sites

Attempt to build up some equity to cover the banker's arses when property prices fall - get the borrower with more (or some!) skin in the game.

This was also covered in today's Sunday Times.

Share this post


Link to post
Share on other sites

I really hope this applies to my ex landlord. He was leading the life of riley on an I/O loan for over £270k. Cost to him, just over £200 a month!! You couldn't rent a room for that. Outrageous!

short term borrowing for long term funding. his bad.

Share this post


Link to post
Share on other sites

Right this would be bloody brilliant. But what do they mean by when their deal ends? For example if they have an IO mortgage it's for the term of the mortgage. Does it mean that if they are on a fixed or tracker deal when this ends they will be put on repayment? What about those already on SVRs?

Suppose I should the article really...

means that even if the rate they are currently paying does not rise, a borrower with a typical £150,000 would pay an extra £390 a month. This calculation is based on the borrower paying a mortgage rate of 3 per cent.

Sounds good but I'd like to know more details.

Edited by Pent Up

Share this post


Link to post
Share on other sites

I really hope this applies to my ex landlord. He was leading the life of riley on an I/O loan for over £270k. Cost to him, just over £200 a month!! You couldn't rent a room for that. Outrageous!

Today's S Times had a table saying I/O repayments on a 200k loan was £500. Which would rise to £948 if they were forced onto capital repayments (they have to find another £448pm). This was typically if their equity dropped to less than 25% due to falling a property value.

I'm not disputing your figures here btw, but there does seem to be some variation in what the I in I/O means.

Share this post


Link to post
Share on other sites

I really hope this applies to my ex landlord. He was leading the life of riley on an I/O loan for over £270k. Cost to him, just over £200 a month!! You couldn't rent a room for that. Outrageous!

that could hurt.

1% IO 270K = £225 per month

1% repayment 270K 25 years £1017 per month

Share this post


Link to post
Share on other sites

Right this would be bloody brilliant. But what do they mean by when their deal ends? For example if they have an IO mortgage it's for the term of the mortgage. Does it mean that if they are on a fixed or tracker deal when this ends they will be put on repayment? What about those already on SVRs?

Suppose I should the article really...

doesn;t mention that, but if they can afford the SVR, I guess they can stay on interest only. It only talks about porting or going for a better deal affter intial fix.

Share this post


Link to post
Share on other sites

IO and less than 25% equity. Flat house prices mean that for 25% equity you would have had to put down 25% deposit, as no capital repayment has taken place. I would think that 5-10% deposit was required for these, which means to get 25% equity means HPI of 15-20% since mortgage inception. This imlpies that most IO mortgages with 25% equity were taken out when houe prices were around 20% lower than here, which is 2003 (ish?). As a result, I would posit that most IO mortgages taken out after 2003 probably don't meet the criteria (yikes).

125% IO losers are f*cked!

Share this post


Link to post
Share on other sites

doesn;t mention that, but if they can afford the SVR, I guess they can stay on interest only. It only talks about porting or going for a better deal affter intial fix.

That's what the ST says to. This is effectively a trap that's being set for when IRs go up - the I/O mortgagees won't have the option of re-mortgaging unless they switch to repayment mortgages.

The ST says that there are 850,000 borrowers with <25% equity,and that there will be 975,00 by the end of the year on current trends. Anyone of those who tries to re-mortgage is between a rock and a hard place; their costs will rocket.

Share this post


Link to post
Share on other sites

"It means that even if the rate they are currently paying does not rise, a borrower with a typical £150,000 would pay an extra £390 a month. This calculation is based on the borrower paying a mortgage rate of 3 per cent."

not for a 25 year plan it wont

IO 150K 25 years £375 per month

Repayment 150K 25 years £711.32 per month an extra £336.

Not sure how many IO mortgages would have been on a teaser rate?

And i thought the average mortgage had RISEN to about £140K recently.

so is she saying that for IO loans they lent much more...due to "affordability".

Edited by Bloo Loo

Share this post


Link to post
Share on other sites

Further on in the article it says that this will happen to people with less than 25% equity - so this seems to be the drop they want to cushion against.

I think this would affect the Wilsons. Except they are too big to fail.

Share this post


Link to post
Share on other sites

I think this would affect the Wilsons. Except they are too big to fail.

Article seemed to be about residential mortgages. I wonder about BTLs. They were mostly sold interest only weren't they in the bubble years? There would be a lot of landlords going out of business I imagine if they had to change.

Thanks for Sunday Times info newbionic - shame it's behind a firewall. How's dear old Anne Ashworth getting along? Do so miss her incisive commentaries

Share this post


Link to post
Share on other sites

.....

Thanks for Sunday Times info newbionic - shame it's behind a firewall. How's dear old Anne Ashworth getting along? Do so miss her incisive commentaries

You're welcome, and true. Ashworth's in the 'Home's' property VI supplement isn't she? That goes unread straight onto the recycling bag along with 'Travel' 'Recruitment', various advertising supplements, and the previous weeks' TV guide.

Share this post


Link to post
Share on other sites

This bit sounds like a quote from someone from the BBC (making out that someone who has borrowed beyond their means is somehow a victim):

“Lenders are worried about a further downturn in prices and are introducing these changes to protect themselves, as well as borrowers. But hard-pressed homeowners may find it’s an extra cost too far.”

Share this post


Link to post
Share on other sites

This bit sounds like a quote from someone from the BBC (making out that someone who has borrowed beyond their means is somehow a victim):

“Lenders are worried about a further downturn in prices and are introducing these changes to protect themselves, as well as borrowers. But hard-pressed homeowners may find it’s an extra cost too far.”

The concern over the borrowers is thinly veiled. They probably have many people sitting with a good deal less than 25 years left on their mortgage and perhaps 50% outstanding with no repayment vehicle but they are not going after them for repayment for the borrowers "own good" as they will be thinking that they'll still get their money back if the "owner" has to sell

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.