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Interest-Only Mortgage Timebombs Are Ticking...


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SMI continues indefinitely for pensioners so it will be taxpayers paying the IO mortgages to bail the banks out.

My god. First you let me know about imputed rent, which has been doing my head in for about ten days. Now this! It really is a blank check for the wrinkly mafia.

Edited by bmf
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So...

The Missus and I bought a house in Reading in 1999 on an IO and we took the rather unusual measure of taking out an endowment insurance policy. We then STR'd in 2004 and spent a year travelling before returning and saving what we had left to use as a deposit when we eventually decide to buy.

In the meanwhile, we've kept the endowment going and, as of the latest statement, when it eventually matures in 2024, it's due to fall short of its original maturity value by about £1k.

So, I have no IO mortgage but I *do* have a repayment vehicle.

Permission to feel a little smug?

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42% of recipients are 65 and over, 15% are 60 to 64, so basically 57% are over 60. Mortgage up to £200,000, yes 200k not a typo and continues for ever with no charge on the property.

Average house price in 1995 was 66k so these people will have had 25 years to pay off a mortgage of 60k ie less than 3k per year and have not managed it. Average student debt in a couple of years will be I guess 60k.

I'm truly stunned by the percentage of over 60s getting SMI - I'd always assumed it was mostly young families who were getting this help - presumably that's what we're supposed to think!

The amounts involved though are not as big as I expected - the figures I just googled are 239,000 in receipt of SMI at a cost of £400m - which means payments are being made on a £45k mortgage on average I think.

EDIT - changed to £45K mortgage - think I've worked it out correctly now

Edited by oldsport
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I'm truly stunned by the percentage of over 60s getting SMI - I'd always assumed it was mostly young families who were getting this help - presumably that's what we're supposed to think!

The amounts involved though are not as big as I expected - the figures I just googled are 239,000 in receipt of SMI at a cost of £400m - which means payments are being made on a £45k mortgage on average I think.

EDIT - changed to £45K mortgage - think I've worked it out correctly now

No wrinkly must *ever* have a furrowed brow. Young men, lay down in the road lest they wet their feet!

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Ages 25 to 39 the recipients total 8%. and the £60k mortgage is 90% of the average house price in 1995. The amount might not be that large but they are a result of total stupidity and this money needs to come from some where ie the under 25s and the funding continues forever.

I think I got the £60K figure wrong - I think it's actually more like £45K based on the 3.63% interest rate I saw quoted - sorry - hope it's right now

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Ages 25 to 39 the recipients total 8%. and the £60k mortgage is 90% of the average house price in 1995. The amount might not be that large but they are a result of total stupidity and this money needs to come from some where ie the under 25s and the funding continues forever.

It looks like they're considering putting a charge on the property in future.

Lord Freud

Lord Freud said:

"The current system of SMI payments does not encourage people to get on top of their own finances. It is also not sustainable. Even with today’s low interest rates it costs Government £400million a year.

"We are committed to supporting homeowners to stay in their own homes when times are hard. But in the future this type of support must be fair and affordable so we are seeking views from experts and the wider public, including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs."

As a core principle, the Government would look at a charge based on the amount of support provided.

This approach would give future claimants continued security in their homes – knowing that they will receive help from the Government towards their mortgage costs

Edited by oldsport
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The amount might not be that large but they are a result of total stupidity and this money needs to come from some where ie the under 25s and the funding continues forever.

Bearing in mind the bill for housing benefit is £20 billion, then £400 million for SMI actually seems extremely low, bearing in mind 70% of the populatioin are "owner occupiers" - I can't help think I'm missing something with the figures?

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Does anyone know when the rules changed that IO mortgages didn't require an investment vehicle/endowment?

The rules always required one, but the onus was on the borrower to make sure it was in place. They could just sign a piece of paper acknowledging this, the bank would file it without checking and that was the end of the process.

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Does anyone know when the rules changed that IO mortgages didn't require an investment vehicle/endowment?

There never was a rule, its just that lenders in the past had to lend sensibly.

with the safe haven of MBS and off balance sheet vehicles, they didnt give a damn...selling quantity over quality became the way to bonuses.

I dont think there is a rule even now.

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"including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs"

"When they sell" That means when they die. Putting a charge on would reduce the incentive for people to downsize or move. Seems odd they want a charge in this case, but its all gravy if you take the government purse for LHA, or for MP's making a fortune in flipping taxpayer funded houses.

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"including options for putting a charge on the homes of future claimants so when they sell up we can recoup some of the costs"

"When they sell" That means when they die. Putting a charge on would reduce the incentive for people to downsize or move. Seems odd they want a charge in this case, but its all gravy if you take the government purse for LHA, or for MP's making a fortune in flipping taxpayer funded houses.

didnt they ban these sorts of schemes some time ago...you know, we give you money, and you give us 10% of your house...

You see, what was a crime against morality 10 years ago, becomes the latest Government measure/idea to fix the malfescance that carries on regardless.

Next it will be those who ARE paying their mortgages that get hit.

You see, the wealth only comes from one person....YOU. If THEY continue to misuse your wealth, YOU have to pay.

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The rules always required one, but the onus was on the borrower to make sure it was in place. They could just sign a piece of paper acknowledging this, the bank would file it without checking and that was the end of the process.

In 1988, I had to prove I had a policy in effect. In 1998, I just signed a piece of paper, which at the time surprised me. I didn't have to prove it.

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I've been sorting a mortgage recently and the Post Office (best 5y fix) wanted the repayment vehicles in place for 1y prior to taking the mortgage out for IO and a very limited number of vehicles were allowed.

On the flip side Northern Rock really didn’t seem that bothered as long as I had one...

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In 1988, I had to prove I had a policy in effect. In 1998, I just signed a piece of paper, which at the time surprised me. I didn't have to prove it.

In 1994 I got a PEP mortgage and only had to prove at the start of it that I was paying into the PEP (now ISA).

For the last decade it seems banks lent any amount to anyone claiming any level of income with no evidence whatsoever - I wonder why we're in a mess now ? :P

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In 1994 I got a PEP mortgage and only had to prove at the start of it that I was paying into the PEP (now ISA).

For the last decade it seems banks lent any amount to anyone claiming any level of income with no evidence whatsoever - I wonder why we're in a mess now ? :P

In 2001 we had to provide significant proof of income to Nationwide. By 2006 when we moved, we took the documentation for a bigger loan but they didn't bother looking..

(This was for repayment, but there did seem to be a decline in standards.)

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In 2001 we had to provide significant proof of income to Nationwide. By 2006 when we moved, we took the documentation for a bigger loan but they didn't bother looking..

(This was for repayment, but there did seem to be a decline in standards.)

I remortgaged in 2001 onto Interest Only and wasn't asked to prove anything.

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  • 2 years later...

Should have downsized, imo - if paying down capital on IO mortgage was going to be such an issue.

Interest only mortgages need to be repaid. Seems they won the misselling for the complex 'Frankenstein' investments.. but c'mon, "Didn't want to put our home at risk." ?

12 August 2015

Next Thursday, pensioners Richard and Rita Kauffman will have their home repossessed by the firm charged with running Britain’s bad banks — despite not being behind with their mortgage payments.

UK Asset Resolution, set up by the Treasury to run down Britain’s bailed-out banks, will begin proceedings against them next week.

‘What’s happened to us is shameful,’ says Richard, 69. ‘It has wrung the life out of us. We’re exhausted and desperate, working flat out in our late-60s to repay the debt.’

A decade ago, the Kauffmans, from Oundle, near Peterborough, had £100,000 in savings. Music teacher Richard and Rita, an acclaimed singer, were looking at ways to slow down. They had a £158,832 interest-only mortgage for their £450,000 home.

http://www.thisismoney.co.uk/money/mortgageshome/article-3194312/The-heart-breaking-mis-selling-scandal-s-costing-Richard-Rita-Kauffman-home-thought-NOT-mortgage.html

http://www.ritacullis.co.uk/contact.php

http://www.rightmove.co.uk/house-prices/PE8/Spinney-Close.html

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Also, from the article...

In 2006, a friend suggested they speak to financial adviser Simon MacKenzie, of Mint Financial Services, to help figure out how to reduce their bills and get more income.

some friend!

The couple were prepared to put in £50,000 savings.

[...]

The idea was that the returns would boost their income and pay off all the debts they had accrued, with extra left over as a bonus.

Of course, using the £50K to pay off some? most? of their debts at the start would have been too sensible.

Edited by mrtickle
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Of course, using the £50K to pay off some? most? of their debts at the start would have been too sensible.

Yes, £50K, and of course their overall savings £100K at the time.

A decade ago, the Kauffmans, from Oundle, near Peterborough, had £100,000 in savings. Music teacher Richard and Rita, an acclaimed singer, were looking at ways to slow down. They had a £158,832 interest-only mortgage for their £450,000 home.

And it appears like they bought the house in 1999, for £235,000.

http://www.rightmove.co.uk/house-prices/PE8/Spinney-Close.html

£100K in savings could have gone long way to paying down IO mortgage at term + they could have added more along the years into savings.

£450K 'value now' - but them deep in debt.

More pics have been added to the article since I first read it. Narrowed it down to this house on streetview, in a pretty setting. A shared courtyard space with other houses.

Make way for smarter money at lower prices. Other people want opportunity too. It's not a life of risk free purest win... where paying down £50K from cash savings is snubbed in preference to taking out 22 traded endowment policies. If that doesn't ring alarm bells on client side, even vs an IFA... then....... your own choice if you chase it imo.

Anyone who thinks they deserve a bailout can donate directly to them, instead of expecting wider society to pick up the bill.

https://www.google.co.uk/maps/@52.5057501,-0.4169756,3a,38.5y,316.85h,84.58t/data=!3m6!1e1!3m4!1sTy1E0ZVVbEPxyjAHCXsG3A!2e0!7i13312!8i6656

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  • 434 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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