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The Masked Tulip

Interest-Only Lenders Refuse To Detail Options For Struggling Borrowers

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Lenders will not say what options they will offer interest-only borrowers worried they will not be able to pay off loan

Mortgage lenders are in the process of writing to borrowers who only pay the interest on their loans each month – rather than chipping away at the outstanding capital element as well – asking them to review their repayment plans. But lenders are not being clear about what will happen to those who reach the end of their agreed mortgage term without being able to clear the capital sum.

http://www.telegraph...-borrowers.html

Edited by The Masked Tulip

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Lenders will not say what options they will offer interest-only borrowers worried they will not be able to pay off loan

http://www.telegraph...-borrowers.html

If true (and this is a newspaper story, after all) this appears to be in contravention ot the FCA guidelines published end of August this year http://www.fca.org.uk/static/documents/finalised-guidance/fg13-07.pdf

Two points from the guidance summary on what lenders should do:

2.3 b Consider what options can be offered to interest-only customers, either during the mortgage term or at maturity, demonstrating why the firm offers some options and not others.

2.4 b Give customers enough time to consider maturity options, especially if the firm’s range of options is limited or if customers must meet specific criteria to be eligible; customers may wish to consider other options and should be given enough time to do so.

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If you don't pay the capital off, you won't have a house. :blink:

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"The Telegraph has heard from a number of readers who are concerned that their lender will force them to switch to a repayment mortgage – which would be far more costly on a monthly basis – or worse, sell their property."

Surely as an intelligent journalist she should at least use the phrase 'the property' As a HPC'er I read the story and that's the first thing that stands out and makes me angry. I'm sure many other people who aren't in the HPC family would read the story and have more sympathy for hard working families losing their homes.

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"The Telegraph has heard from a number of readers who are concerned that their lender will force them to switch to a repayment mortgage – which would be far more costly on a monthly basis – or worse, sell their property."

Surely as an intelligent journalist she should at least use the phrase 'the property' As a HPC'er I read the story and that's the first thing that stands out and makes me angry. I'm sure many other people who aren't in the HPC family would read the story and have more sympathy for hard working families losing their homes.

They should do that! They will have less money to spend on "tat". "Tat" is not necessary, although I am not faultless, in that department! :blink:

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I think it's more that there aren't that many options Available. No capital repayment plan, possible high ltv, and cannot afford a repayment mortgage.

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Having read the story properly now, it actually says that lenders wouldn't tell the Sunday Telegraph what options they were offering, not that they were telling the customers.

I expect the lenders don't want the Torygraph criticising them for making borrowers repay the money they were lent. Forcing people to move on to repayment mortgages they can't afford - how very dare they!

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I guess the banks are just kicking off the first letter in a long process.

After the first letter goes out pointing they have an IR mortgage they will expect a number of responses:

1) Not to worry. I have a 300K policy maturing and will pay off the mortgage.

2) I have progrsss up the career ladder and my wife has returned to work. We will commence a 10 year capital repayment scheme.

3) Whats IRs? It my house.

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Options!!!!

Option 1. Pay back the capital you borrowed from your investments/savings

Option 2. Sell the house and pay back the capital from the equity + from your investments/savings

Option 3. Bankruptcy.

This country is a joke.

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Maybe the only option for some is to continue paying for the rest of their lives...(bit like a bedroom tax). Then the house will be sold. ;)

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Maybe the only option for some is to continue paying for the rest of their lives...(bit like a bedroom tax). Then the house will be sold. ;)

So we will have tennants paying rent to state owned banks....what we then have is a set of council houses where idiots are paying a small fortune for the privilege of renting it.

You have got to laugh. :lol::lol::lol::lol:

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is it not the case that a lot of IO mortgages are for BTL as it is more tax efficient. Do they have a repayment plan other than boot out the tenant and sell the property? would they be compensated, bailed out, forbearance shown? I hope not :o

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is it not the case that a lot of IO mortgages are for BTL as it is more tax efficient. Do they have a repayment plan other than boot out the tenant and sell the property? would they be compensated, bailed out, forbearance shown? I hope not :o

The property may be more valuable with the tenant in it. Avoids a void. <_<

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They should do that! They will have less money to spend on "tat". "Tat" is not necessary, although I am not faultless, in that department! :blink:

Hmmm.

Imagine you'd been a good little debt slave and taken out a £500k mortgage on a £600k 2 bed terrace in London, with an *ahem* light-touch approach to proving income and repayments plans. Or it was based on dual income but there is now only a single income.

Based on current deals, your IO payments would be £1200 per month. Repayment would be £2350/month. That's more than the obligatory monthly iPod..

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Fro the telegraph article

The FCA estimated that 2.6 million interest-only mortgages will be due for repayment by 2043. It said 10pc of these borrowers – 260,000 people – do not have a strategy to repay their mortgage and around half of all interest-only borrowers will not have enough money to pay off their loan. The FCA expects many borrowers will have a shortfall of more than £50,000 at the end of their mortgage.

New research puts the figure higher. Ascent Performance Group, which provides services to lenders, last week said 20pc of interest-only borrowers do not have repayment vehicles in place and do not know how they will pay off the capital.

I suspect the low sample size of the FCA work is already coming home to haunt it , i.e. I suspect Ascent have much better data set as it is at the coal face.

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is it not the case that a lot of IO mortgages are for BTL as it is more tax efficient. Do they have a repayment plan other than boot out the tenant and sell the property? would they be compensated, bailed out, forbearance shown? I hope not :o

I think HTB 2 is timed/designed to bail them out or give them a chance to pass the buck

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Maybe the only option for some is to continue paying for the rest of their lives...(bit like a bedroom tax). Then the house will be sold. ;)

You may jest, but....

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I think HTB 2 is timed/designed to bail them out or give them a chance to pass the buck

pray tell, how does HTB2 bail anyone out? its a bought and paid for guarantee, which the borrower will pay for the term of the mortgage.

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Fro the telegraph article

[/b]

I suspect the low sample size of the FCA work is already coming home to haunt it , i.e. I suspect Ascent have much better data set as it is at the coal face.

they DO have a repayment vehicle..its the security they pledged to borrow the money with.

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Free houses for this lot - it'll be the next wave of 'mis-selling'. Nicky Campbell will do something on it.

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But it's their pension!

I see what you did there.

Of course, for a house to be a pension, it has to produce a profit from some activity.

So a BTL which cant be paid for has never made a profit in reality.

Imputed rent pays no bills.

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