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Alfie Moon

Daily Wail Article Re Possible End Of Interest Only Mortgages

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See the following Daily Wail article about the end of Interest Only mortgages:

http://www.dailymail.co.uk/news/article-1319543/Interest-mortgages-disappear-new-affordability-test-implemented.html

Some very misleading comments being added saying interest only mortgages are harmless good products that more and more people should use. Would be good to see some comments added putting forward the truth of interest only mortgages + the usual red/green arrows as appropriate.

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Have done so, make sure you flick through all the ranking options (oldest newest etc) to make sure all you see all the comment and can rate them.

See the following Daily Wail article about the end of Interest Only mortgages:

http://www.dailymail...mplemented.html

Some very misleading comments being added saying interest only mortgages are harmless good products that more and more people should use. Would be good to see some comments added putting forward the truth of interest only mortgages + the usual red/green arrows as appropriate.

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There's absolutely nothing wrong with interest only mortgages, providing the borrower has some sort of vehicle to pay off the capital.

IO mortgages aren't inherently bad, it's the fact that banks have been lending on an IO basis to people who have no hope of ever being able to pay the mortgage off that's the problem.

Some people, myself included, don't have a stable monthly income. For me an IO mortgage makes sense as some months I may want to overpay £3K of capital and others I may just want to pay the interest.

As long as, over the lifetime of the mortgage, the borrower has adequate means to pay the capital then IMO they're a perfectly legitimate way of getting a house.

Edited by jon211

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Some people, myself included, don't have a stable monthly income.

So no stable income means you should have a mortgage?

Nah isn't that what got us into this mess..?

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There's absolutely nothing wrong with interest only mortgages, providing the borrower has some sort of vehicle to pay off the capital.

But very few people do, which is why they are such a problem.

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There's absolutely nothing wrong with interest only mortgages, providing the borrower has some sort of vehicle to pay off the capital.

IO mortgages aren't inherently bad, it's the fact that banks have been lending on an IO basis to people who have no hope of ever being able to pay the mortgage off that's the problem.

Some people, myself included, don't have a stable monthly income. For me an IO mortgage makes sense as some months I may want to overpay £3K of capital and others I may just want to pay the interest.

As long as, over the lifetime of the mortgage, the borrower has adequate means to pay the capital then IMO they're a perfectly legitimate way of getting a house.

I thought the plan was to simply that the increased equity in the house pay off the mortgage? It was a plan that couldn't possible go wrong, unless of course house prices fall.

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I had an IO mortgage and paid it off in full in a few years.

An IO mortgage is much more flexible. I paid in the minimum most months and used all windfalls and bonuses to repay capital. The repayment vehicles they were selling were utter rubbish so I never took one.

Look carefully at the small print on calculating interest and you will often find it cheaper to get IO rather than Repayment if you make the same repayments. The way the mortgage is calculated favours the IO slightly because the way they count days is earlier.

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IO great when interest rates are low, and only really prominent in recent history.

They will be history when interest rates go back up.

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So no stable income means you should have a mortgage?

Nah isn't that what got us into this mess..?

Some people can have a reasonably safe job, but have an 'erratic' income.

Contractors in many fields, people who's work is seasonal or weather dependent, suppliers of specialist equipment who are paid only on delivery, etc.

Over the course of a year or so, these people may well have a stable income - but on a month-to-month basis, it may show significant fluctuations. An IO mortgage may provide additional flexibility which allows such a person to buy a home, that they would otherwise not be able to finance (even though they could afford it).

However, such a scheme is predicated on the mortgagor being financially savvy enough to overpay when times are good (or to have some other type of repayment vehicle), to ensure that they are able to repay the loan.

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But very few people do, which is why they are such a problem.

What problem are you refering to exactly, being able to pay the mortgage back or that affordability was increased due to IO loans?

For a lot of people, myself previously included, this was the only option we had at the time.

Would I get an IO loan again, probably and I would use the captial element of it to invest elsewhere.

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Some people can have a reasonably safe job, but have an 'erratic' income.

Contractors in many fields, people who's work is seasonal or weather dependent, suppliers of specialist equipment who are paid only on delivery, etc.

Over the course of a year or so, these people may well have a stable income - but on a month-to-month basis, it may show significant fluctuations. An IO mortgage may provide additional flexibility which allows such a person to buy a home, that they would otherwise not be able to finance (even though they could afford it).

However, such a scheme is predicated on the mortgagor being financially savvy enough to overpay when times are good (or to have some other type of repayment vehicle), to ensure that they are able to repay the loan.

Indeed, this is exactly the position I'm in.

Some months I may not have any income coming in, other months I may take £20K.

IO mortgages give a bit of additional flexibility in that situation.

I reckon the majority of people that have taken IO mortgages probably shouldn't have done so and these are the problem cases that need to be solved, but an outright ban is a bit foolhardy IMO.

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So no stable income means you should have a mortgage?

Nah isn't that what got us into this mess..?

It did in the states, but there is no evidence to suggest it did here.

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Indeed, this is exactly the position I'm in.

Some months I may not have any income coming in, other months I may take £20K.

IO mortgages give a bit of additional flexibility in that situation.

I reckon the majority of people that have taken IO mortgages probably shouldn't have done so and these are the problem cases that need to be solved, but an outright ban is a bit foolhardy IMO.

Cart before the horse.

Back in the old days, people had repayment mortgages that people overpaid to accommodate fluctuations in income. House prices were lower which meant you could have a proper mortgage and still have slack in one's income. Mortgages were for 10 or 12 years. If only "proper" mortgages were available house prices would have to adjust to the fact that many incomes are unstable

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The penny is dropping with the readership of The Daily Mail that all is not healthy with the Housing Market. The Daily Mail remains my main barometer of UK public sentiment (these are readers with money to invest, assets and jobs to lose yet possessing amazing levels of denial when it suits them) Its nice to see them slowly turning bear :lol:

Edited by Diet Cola Addict

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  • 143 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%



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