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Dave Beans

65K Victims Have No Idea How They'll Pay Off Their Io Mortgage

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http://www.dailymail.co.uk/news/article-2654565/Home-visits-banks-mortgages-Staff-going-homes-check-borrowers-finances-order.html


Bank staff are visiting homeowners with interest-only mortgages to check their finances are in order. Lenders fear that up to 500,000 customers have not worked out how to repay the loans when they mature. They are being visited, telephoned, sent questionnaires or summoned to meetings at their bank to lay out their plans. The Council of Mortgage Lenders said yesterday it was highly unlikely that any home visits had not been pre-arranged, and that people should not prepare for an unexpected knock at the door from their mortgage lender.
The worry surrounds people who took out an interest only mortgage – but have no strategy for paying back the loan, or had a plan which has not worked out. With an interest only mortgage, you repay only the interest on the mortgage but not a penny of the actual loan.
Around 2.2million people in Britain have this type of mortgage deal and a further 620,000 have a loan which is partly an interest only mortgage but partly a repayment mortgage. Last year, mortgage lenders were ordered to contact homeowners whose interest only loan matures before the end of 2020 to discuss what they plan to do about repaying the loan. But shocking figures, published yesterday by the CML, found less than one in three homeowners who have been contacted by their lender have responded.
It raises fears that hundreds of thousands of homeowners are buying their heads in the sand, and refusing to deal with the problem of their mortgage. The CML said: ‘Around 30 per cent of customers contacted have so far responded.’
Some are absolutely fine, know exactly how they will repay the money and simply do not feel the need to tell the lender that there is no need to panic. But others will know there is a problem, be aware that they have no way of repaying the loan but cannot face up to the nightmare that this presents. They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures. Paul Smee, director general of the CML, said the last year is ‘just the start of a long-term, continuous communication programme.’
He said the 30 per cent figure is ‘an encouraging start’, but added: ‘It also highlights the challenges of achieving effective two-way communication.’
Last year, the Financial Conduct Authority, the financial regulator, revealed the scale of the problem surrounding a type of mortgage which has virtually disappeared. These types of loans used to be hugely popular and regularly handed out by Britain’s banking giants and building societies, with some victims borrowing more than seven times their salary.
Of the 11.2million mortgages in Britain, around one in four is an interest only deal. Last year, the FCA said it was particularly concerned about around 65,000 victims who said they had no knowledge of how interest only mortgage deals work and the fact they must repay the loan when it matures. Around 275,000 have an average shortfall of £137,000, while the average full-time worker’s salary is only £27,000, according to figures from last year’ s report. Yesterday Martin Wheatley, the FCA’s chief executive, said mortgage lenders ‘need to keep the momentum going’ and continue to contact their customers with interest only mortgages.
He said: ‘Our advice for borrowers is unchanged: you must with engage with your lender; this is a shared problem and you need to work together to resolve it.’

Ah, so the financial illiterate who signed a legally binding document that kept them in hoc for 25 or 30 years, yet couldn't be arsed to find out the facts, are now suddenly "victims"..I bet that's the tip of the proverbial iceberg...

Edited by Dave Beans

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with some victims borrowing more than seven times their salary.

They just wanted a home, you renting fools.

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http://www.dailymail.co.uk/news/article-2654565/Home-visits-banks-mortgages-Staff-going-homes-check-borrowers-finances-order.html

Ah, so the financial illiterate who signed a legally binding document that kept them in hoc for 25 or 30 years, yet couldn't be arsed to find out the facts, are now suddenly "victims"..I bet that's the tip of the proverbial iceberg fatberg...

Exactly, I can see government support and the media urging the banks to allow some kind of interest free payment plans. :angry:

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Exactly, I can see government support and the media urging the banks to allow some kind of interest free payment plans. :angry:

......and take the capital from any equity accrued.....home owner then becomes a renter, something they would have been anyway....

Question? Are these IO mortgages including or excluding non regulated BTL mortgages?.....if not how many are being used for BTL purposes?

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They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures.

What makes the experts think these peoples homes will sell at a price that will pay off the mortgage.?The longer time goes on, the greater I see the potential for a severe crash.

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They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures.

What makes the experts think these peoples homes will sell at a price that will pay off the mortgage.?The longer time goes on, the greater I see the potential for a severe crash.

It is in fact, a naked short, illegal I beleive for experts to sell on the stock market.

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They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures.

What makes the experts think these peoples homes will sell at a price that will pay off the mortgage.?The longer time goes on, the greater I see the potential for a severe crash.

I can imagine these experts trying to persuade them to sell now, while there's still a chance.

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They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures.

What makes the experts think these peoples homes will sell at a price that will pay off the mortgage.?The longer time goes on, the greater I see the potential for a severe crash.

More than that, at the time a lot of the sales patter for IO mortgages was based on 'You buy a £250k house, hold it for 10 years till it goes up to £500k, then sell and downsize with the mortgage paid off'.

It was suspect at the time.

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They might have no choice but to sell their home because it will be their only way of paying off their loan when it matures.

What makes the experts think these peoples homes will sell at a price that will pay off the mortgage.?The longer time goes on, the greater I see the potential for a severe crash.

Historically inflation has meant that the amount of fiat you need to buy a house has increased. If you think this is going to continue (you read Ambrose in the DT banging on about QE sending sterling the way of the Zimbabwe dollar) then an IO mortgage makes sense. The house will generate much more fiat on it's sale than it cost to "buy". Houses - historically - have been a good hedge against inflation.

I totally agree a crash is likely, imminent even. But add 20 years and the crash will have been and gone and the amount of fiat your house will generate on it's sale will still exceed the sum borrowed.

The huge flaw in this strategy is the return of normal interest rates. Since (again) most people don't believe that will happen I would suggest that the vast majority of people see little if any risk in an IO mortgage. Experts and money renters alike.

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Historically inflation has meant that the amount of fiat you need to buy a house has increased. If you think this is going to continue (you read Ambrose in the DT banging on about QE sending sterling the way of the Zimbabwe dollar) then an IO mortgage makes sense. The house will generate much more fiat on it's sale than it cost to "buy". Houses - historically - have been a good hedge against inflation.

I totally agree a crash is likely, imminent even. But add 20 years and the crash will have been and gone and the amount of fiat your house will generate on it's sale will still exceed the sum borrowed.

The huge flaw in this strategy is the return of normal interest rates. Since (again) most people don't believe that will happen I would suggest that the vast majority of people see little if any risk in an IO mortgage. Experts and money renters alike.

the trade down target house also goes up in FIAT terms....

All assumes that there is terrible inflation, which the BoE is targetting, or rates are to continue falling...

And if we go Zimbabwe, I seem to recall that about 30% of their population died or left.

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They could walk away from the house and declare themselves bankrupt.

I never understand why more arent doing this as Britain is after all the best place on earth to go bankrupt.

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I thought the plan was to sell the house and downsize? With the equity built up from years of HPI how could this plan go wrong?

I`m itching to see these IO payers downsize from a two bed roomed, no storage, postage stamp sized gardened, parking space for a fiat 500 size car, galley sized kitchened house to a smaller one.....

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More than that, at the time a lot of the sales patter for IO mortgages was based on 'You buy a £250k house, hold it for 10 years till it goes up to £500k, then sell and downsize with the mortgage paid off'.

It was suspect at the time.

Could a stupid person who took one out for that reason ever prove if it went to arbitration? Their word against yours type thing...

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They could walk away from the house and declare themselves bankrupt.

I never understand why more arent doing this as Britain is after all the best place on earth to go bankrupt.

Mortgages stay with you for life...the word itself means till death unless you cannot be traced or contacted in 12 years (I think its 12)

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I`m itching to see these IO payers downsize from a two bed roomed, no storage, postage stamp sized gardened, parking space for a fiat 500 size car, galley sized kitchened house to a smaller one.....

This compact and bijou little number could be just the ticket, or you could just add it to your portfolio

http://www.rightmove.co.uk/property-for-sale/property-44738014.html

£3500 per f'en m2!

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Mortgages stay with you for life...the word itself means till death unless you cannot be traced or contacted in 12 years (I think its 12)

Bankruptcy would get rid of it, the bank being the main creditor would become the trustee of the property.

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Could a stupid person who took one out for that reason ever prove if it went to arbitration? Their word against yours type thing...

Are mortgage providers required to state "the value of your house may go down as well as up"?

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Could a stupid person who took one out for that reason ever prove if it went to arbitration? Their word against yours type thing...

I doubt it. I think the industry learned some very important lessons from the Endowments mis-selling saga. Namely, 'Never write the sales promises down..'.

I do think that an awful lot of people were sold these products when they shouldn't have been, without really understanding them. But I would also bet that there will be checkboxes on the forms saying that the borrowers are fully aware of the need for a repayment plan, and the forms will be signed.

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Papieren bitte! Alles in ordnung?!

Schnell schnell!!

Bank staff are visiting homeowners with interest-only mortgages to check their finances are in order
Edited by R K

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Bankruptcy would get rid of it, the bank being the main creditor would become the trustee of the property.

And then it would be the banks problem and no longer a "shared" problem. Great to see more negative sentiment being piled on the fire from the media.

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I doubt it. I think the industry learned some very important lessons from the Endowments mis-selling saga. Namely, 'Never write the sales promises down..'.

I do think that an awful lot of people were sold these products when they shouldn't have been, without really understanding them. But I would also bet that there will be checkboxes on the forms saying that the borrowers are fully aware of the need for a repayment plan, and the forms will be signed.

If you have tens of thousands who are all saying the same thing...yep, we were told that we could double/triple our money in ten years, could that be used as evidence of mis-selling?

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