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eek

Lifetime Mortgages Anyone

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This was front page of The Times today.

This nugget of gold-plated wisdom from a debt peddler caught my eye:

Aaron Strutt, from Trinity Financial, a mortgage broker, said that building societies had been inundated with buyers aged over 65 who had been turned down by the big banks.“People are coming to the end of their mortgage terms and they are not qualifying for another and this has angered a lot of borrowers,” Mr Strutt said. “If you are 65 and after a relatively large mortgage but can only get a five or ten-year mortgage term, then lenders will only put the mortgage on a full capital repayment basis, which makes the monthly repayments unaffordable.”

Surely if paying back the capital element of the debt makes it unaffordable then the loan is, er, unaffordable.

Where does this end? The logical conclusion is that the lenders end up owning all the housing stock and they can only have their capital returned once the houses are sold. And they can only sell them if they provide huge debt on an interest only basis to new buyers, so the capital is never returned.

Have the banks unwittingly invested/lost all their capital in a ponzi scheme of their own invention?

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This was front page of The Times today.

This nugget of gold-plated wisdom from a debt peddler caught my eye:

Aaron Strutt, from Trinity Financial, a mortgage broker, said that building societies had been inundated with buyers aged over 65 who had been turned down by the big banks.“People are coming to the end of their mortgage terms and they are not qualifying for another and this has angered a lot of borrowers,” Mr Strutt said. “If you are 65 and after a relatively large mortgage but can only get a five or ten-year mortgage term, then lenders will only put the mortgage on a full capital repayment basis, which makes the monthly repayments unaffordable.”

Surely if paying back the capital element of the debt makes it unaffordable then the loan is, er, unaffordable.

Where does this end? The logical conclusion is that the lenders end up owning all the housing stock and they can only have their capital returned once the houses are sold. And they can only sell them if they provide huge debt on an interest only basis to new buyers, so the capital is never returned.

Have the banks unwittingly invested/lost all their capital in a ponzi scheme of their own invention?

If you are 65 and need a large mortgage I'd wonder what on earth you'd done with your money and HPI gains of the last 30 years - would this make you a good credit risk?

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Aged 65 its probably that they have just retired and then been kicked out by the Mrs..

I'm lodging during the week at the moment with someone whose mum divorced her dad out 6 months after retirement....

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If you are 65 and need a large mortgage I'd wonder what on earth you'd done with your money and HPI gains of the last 30 years - would this make you a good credit risk?

Almost certainly not. Doesn't make the building societies look too stable if they're taking these kinds of borrowers on.

Edited by Neverwhere

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Almost certainly not. Doesn't make the building societys look too stable if they're taking these kinds of borrowers on.

Agreed - I suspect that repossession will be very tricky (PR implications of throwing a 75 year old out on the street will cause fits in the boardroom) and maintenance of the property is likely to get harder for the OO as they get older.

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Perhaps these are the opening skirmishes in dealing with the 'IO with no known repayment vehicle' spike which doesn't really get going for a decade yet.

Dealing with it in the only way they know- can kicking. I guess this formalises the vehicle to 'repayment upon death'. Probably a stealth writeoff/jubilee for plenty of those that remortgaged in peak bubble years. Very frustrating.

Edited by The Knimbies who say No

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Agreed - I suspect that repossession will be very tricky (PR implications of throwing a 75 year old out on the street will cause fits in the boardroom) and maintenance of the property is likely to get harder for the OO as they get older.I

I imagine that as long as the interest payments are made, the lender will simply repossess the asset on the borrower's death.

Tricky if the borrower leaves dependent in the house with no means to pay the mortgage.

Trickier still if the value of that house has gone down since the loan was issued.

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:lol::lol::lol:

A death renter

Yep and a renter who is responsible for all mantainance costs Edited by eek

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If you are 65 and need a large mortgage I'd wonder what on earth you'd done with your money and HPI gains of the last 30 years - would this make you a good credit risk?

To be fair some of them could have been renters and decided to buy very late for a bit more security of tenure in their old age.

Still doesn't excuse taking out an IO mortgage though - that's madness at any age

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I can see the Property118 discussion thread already:

"My tenant died one month into an AST, can I still issue them with a Section 21?"

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I can see the Property118 discussion thread already:

"My tenant died one month into an AST, can I still issue them with a Section 21?"

There's the not so urban myth of students dying and the landlord wanting to get the rent off the guarantor parents...

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Agreed - I suspect that repossession will be very tricky (PR implications of throwing a 75 year old out on the street will cause fits in the boardroom) and maintenance of the property is likely to get harder for the OO as they get older.

It seems to me that, instead of letting the risk embodied in existing interest only lending dissipate through gradual sales and repayments as terms come to an end, they're actively transferring that risk from other lenders' balance sheets onto their own. Bonkers.

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Perhaps these are the opening skirmishes in dealing with the 'IO with no known repayment vehicle' spike which doesn't really get going for a decade yet.

Dealing with it in the only way they know- can kicking. I guess this formalises the vehicle to 'repayment upon death'. Probably a stealth writeoff/jubilee for plenty of those that remortgaged in peak bubble years. Very frustrating.

Thus ensuring that the 'IO with no known repayment vehicle' spike will be even larger than it would be otherwise.

:rolleyes:

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Thus ensuring that the 'IO with no known repayment vehicle' spike will be even larger than it would be otherwise.

:rolleyes:

Perhaps I am too cynical!

Maybe the earliest maturing types of these problem IO loans are maybe typically of a small enough balance(caveat: I've no idea) that a ten or 15 year repayment deal would be easily achievable. Easy to be sanguine (as a lender) with a late 1980s IO mortgage for a few tens of thousands of quid, perhaps. What happens when they start routinely encountering the 2004 onwards deals is another matter..

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Perhaps I am too cynical!

Maybe the earliest maturing types of these problem IO loans are maybe typically of a small enough balance(caveat: I've no idea) that a ten or 15 year repayment deal would be easily achievable. Easy to be sanguine (as a lender) with a late 1980s IO mortgage for a few tens of thousands of quid, perhaps. What happens when they start routinely encountering the 2004 onwards deals is another matter..

I don't think you're being too cynical. From Simon Taylor's post from The Times front page:

Aaron Strutt, from Trinity Financial, a mortgage broker, said that building societies had been inundated with buyers aged over 65 who had been turned down by the big banks.“People are coming to the end of their mortgage terms and they are not qualifying for another and this has angered a lot of borrowers,” Mr Strutt said. “If you are 65 and after a relatively large mortgage but can only get a five or ten-year mortgage term, then lenders will only put the mortgage on a full capital repayment basis, which makes the monthly repayments unaffordable.

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