interestrateripoff Posted April 24, 2013 Share Posted April 24, 2013 http://www.dailymail.co.uk/money/mortgageshome/article-2313731/Interest-mortgage-timebomb-force-400-000-homes.html Thought the endowment scandal had fizzled out, you couldn't be more wrong...Between 1984 and 1994, eight million homebuyers were convinced to take out an interest-only mortgage. In some years, four in every five loans issued were interest-only. With these deals, monthly repayments are low because you only pay off the interest on the loan every month, but none of the capital. So, alongside this deal, borrowers were sold an endowment — a type of regular savings/investment plan run by an insurance company. At the height of the sales frenzy in 1987, 2.3 million people took out an endowment. The idea was that buyers would put aside a sum every month, and at the end of their mortgage term — typically 25 years — there would be enough money to pay off their mortgage debt. The financial advisers who sold the endowments often also promised that investment returns on these plans would be so good that there would be a handsome sum left over. However, millions have been disappointed. Over the past five years the average payout has plunged by up to 38 per cent. More at the link if you can stand clicking on it. Bailout for endowment holders coming soon? Quote Link to comment Share on other sites More sharing options...
RichB Posted April 24, 2013 Share Posted April 24, 2013 Oh.... and what about the people that have bought since 2000 on interest only - without even the pretense of an endowment as a repayment vehicle? Quote Link to comment Share on other sites More sharing options...
TrevorS Posted April 24, 2013 Share Posted April 24, 2013 http://www.dailymail.co.uk/money/mortgageshome/article-2313731/Interest-mortgage-timebomb-force-400-000-homes.html More at the link if you can stand clicking on it. Bailout for endowment holders coming soon? Anyone who bought pre-1995 is sitting on amounts of equity ranging from large to mahoosive, so I don't think the majority would have any problems getting some type of remortgage against the relatively small amounts of loan due, particularly with forbearance the order of the day. Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted April 24, 2013 Share Posted April 24, 2013 Oh.... and what about the people that have bought since 2000 on interest only - without even the pretense of an endowment as a repayment vehicle? They are f*ucked, the bank will hope to make up losses from them with new lending when the inevitable crash starts to take shape. It will be sentiment driven, and "no one will have seen it coming" Quote Link to comment Share on other sites More sharing options...
SleepyHead Posted April 24, 2013 Share Posted April 24, 2013 The Interest only mortgages of today makes the 1980/90's endowment scandal look quaint. Not even close to the insanity of today's bubble. Quote Link to comment Share on other sites More sharing options...
Eddie_George Posted April 24, 2013 Share Posted April 24, 2013 Don't worry, the government taxpayers will bail them out. You can't be a loser in the UK. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted April 24, 2013 Share Posted April 24, 2013 Don't worry, the government taxpayers will bail them out. You can't be a loser in the UK. We're all in this together. Quote Link to comment Share on other sites More sharing options...
pyracantha Posted April 24, 2013 Share Posted April 24, 2013 Oh.... and what about the people that have bought since 2000 on interest only - without even the pretense of an endowment as a repayment vehicle? And the many who bought on a repayment mortgage but have had to convert to interest only as they couldn't keep up payments. Most of whom I expect thought this would just be a temporary solution for them and so have no repayment vehicle either. It really is like watching a very slow, very large train crash... Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted April 24, 2013 Share Posted April 24, 2013 How can the interest only mortgage lending be considered a scandal ? It's pretty obvious you are just paying back the interest on the loan and at some point will need to pay back the capital. Quote Link to comment Share on other sites More sharing options...
Monkey Posted April 24, 2013 Share Posted April 24, 2013 Oh.... and what about the people that have bought since 2000 on interest only - without even the pretense of an endowment as a repayment vehicle? inflation will inflate away the debt, or so i am told Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted April 24, 2013 Share Posted April 24, 2013 How can the interest only mortgage lending be considered a scandal ? It's pretty obvious you are just paying back the interest on the loan and at some point will need to pay back the capital. Just means many thousands are going to be stuck in their debt-hutches all their lives, or until they default on the loan? Should have just rented instead, at least you can move when you like Quote Link to comment Share on other sites More sharing options...
Eddie_George Posted April 24, 2013 Share Posted April 24, 2013 How can the interest only mortgage lending be considered a scandal ? It's pretty obvious you are just paying back the interest on the loan and at some point will need to pay back the capital. Yeah, the clue is in the title. How stupid do you have to be to not understand it? Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted April 24, 2013 Share Posted April 24, 2013 Only 400,000? Quote Link to comment Share on other sites More sharing options...
tomandlu Posted April 24, 2013 Share Posted April 24, 2013 Yeah, the clue is in the title. How stupid do you have to be to not understand it? AFAICT it's not the IOM, it's the false promises regarding endowments. Not that there's much excuse for that: Borrower: So this endowment will definitely pay off the capital? Lender: Absolutely - and probably with a nice bonus on top. B: So, where does it say that in the T&C? L: Well, it doesn't. B: Why not? L: Well, obviously there's some risk, and we ... B: Which parts of 'absolutely' and 'definitely' are confusing for you? Tosser. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted April 24, 2013 Share Posted April 24, 2013 Only 400,000? Only 400000 have admitted they have a problem, the other 5 million think once how prices recover they will be fine. Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted April 24, 2013 Share Posted April 24, 2013 Only 400,000? Yeah, add in MEW, card and other debt, and job losses, and we are talking millions? The whole country fell to cheap credit and celeb culture, the mess and fallout is going to be IMMENSE. Quote Link to comment Share on other sites More sharing options...
koala_bear Posted April 24, 2013 Share Posted April 24, 2013 Only 400,000? Only 400,000 forced out of their homes, most will be able to make up the shortfall assuming they didn't MEW to oblivion . [that is a pretty big assumption, which means 400k could easily be too low] As an example of those unaffected by a shortfall, my parents took out an endowment in the 1980s which had a small short fall which my dad paid off with some cash lurking in his current account when the endowment matured. This may have been partly due to the endowment return assumptions being fairly sensible (the actual mortgage broker was a then youthful Ray Boulger!) and my dad realising they return would be less and planning for that possibility. Quote Link to comment Share on other sites More sharing options...
tomwatkins Posted April 24, 2013 Share Posted April 24, 2013 How can the interest only mortgage lending be considered a scandal ? It's pretty obvious you are just paying back the interest on the loan and at some point will need to pay back the capital. "Interest? Capital? What are those? I'm an old man, I didn't know what I was signing".....hobbles away to the court toilets whilst wiping a tear from his eye. Case dismissed and his mortgage is paid off, plus costs. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted April 24, 2013 Share Posted April 24, 2013 Only 400,000 forced out of their homes, most will be able to make up the shortfall assuming they didn't MEW to oblivion . [that is a pretty big assumption, which means 400k could easily be too low] As an example of those unaffected by a shortfall, my parents took out an endowment in the 1980s which had a small short fall which my dad paid off with some cash lurking in his current account when the endowment matured. This may have been partly due to the endowment return assumptions being fairly sensible (the actual mortgage broker was a then youthful Ray Boulger!) and my dad realising they return would be less and planning for that possibility. I dodged that bullet by the skin of my teeth. We took out a 20 year endowment mortgage in 1976, but paid it off in less than 15 years, cashed in the endowment policy and pocketed about £12K. Had the mortgage run to term it would have been a different story. Quote Link to comment Share on other sites More sharing options...
Warwick-Watcher Posted April 24, 2013 Share Posted April 24, 2013 Yeah, the clue is in the title. How stupid do you have to be to not understand it? Apparently 39% of people would vote Labour today if there was a general election... So that suggests at least 20 million stupid people in the UK. http://ukpollingreport.co.uk/ Quote Link to comment Share on other sites More sharing options...
Snafu Posted April 24, 2013 Share Posted April 24, 2013 I've heard about endowment mortages (before my time) but didn't realise it was basically an interest only mortgage with future promises of riches. Wow. That's a lot of mortgages. Quote Link to comment Share on other sites More sharing options...
RufflesTheGuineaPig Posted April 24, 2013 Share Posted April 24, 2013 Only 400000 have admitted they have a problem, the other 5 million think once how prices recover they will be fine.+1. Basically, this is what will happen. Then They'll say it's not their fault that house prices fell, and demand a bailout. After all, it's the governments fault prices fell.Yeah, add in MEW, card and other debtThis is where it will all go wrong.If you bought in 1988 and haven't MEWed, then any outstanding debt on the property will be a pittance. The problem is people borrowed against the inflating values. Quote Link to comment Share on other sites More sharing options...
goldbug9999 Posted April 24, 2013 Share Posted April 24, 2013 So that suggests at least 20 million stupid people in the UK. Thats presumably in addition to the 30 million stupid people who would vote tory or libdem. Quote Link to comment Share on other sites More sharing options...
Freeholder Posted April 24, 2013 Share Posted April 24, 2013 The good thing about a lot of the endowment/interest only deals back in the eighties was that there was no penalty for early repayment. I used one of these to buy my house in 1988, overpaid it from the start and have long since payed it off. The endowment pays out next month. It will in round numbers produce £26,000. The mortgage was £36,000. I had been in the happy position of having a very large deposit to put down. Anyone of my generation who finds this sort of thing a surprise has not been opening their post for a decade or more. we were warned, many times. Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted April 24, 2013 Share Posted April 24, 2013 Apparently 39% of people would vote Labour today if there was a general election... So that suggests at least 20 million stupid people in the UK. http://ukpollingreport.co.uk/ at least. Quote Link to comment Share on other sites More sharing options...
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