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FT - Ticking time bomb of interest-only mortgages

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IO - Be Afraid, Be Very Afraid...

In the Citizens Advice Bureau no one can hear you scream!

https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7eaa

Quote

A repayment crunch looms with repercussions for hundreds of thousands of borrowers

1.9m - The number of borrowers who are just paying off the interest on their mortgage debts, according to the Council for Mortgage Lenders

This year and next, the Financial Conduct Authority expects to see “peak maturity” of such mortgage plans sold in the 1990s and early 2000s. The people who took out these loans are likely to be approaching retirement, so may have trouble obtaining another loan if their endowment fails to cover the repayment. However, house price rises across the UK mean the FCA forecasts most will have relatively high levels of equity in their property.The second crunch point is expected in 2022. This is when the FCA forecasts that a large tranche of interest-only mortgages issued between 2003 and 2009 will start to mature, peaking in 2028. However, these loans — issued at the height of the credit crunch — were typically advanced to borrowers classified as “less affluent” who will be in their 40s and 50s when repayment is due.

 

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It's perfectly fine, all of the IO mortgages will have adequate repayment plans in place ready to conclude the loan, all after rigorous checking by the lender at the time the loan was acquired.-_-

Edited by JustAnotherProle

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1 minute ago, JustAnotherProle said:

It's perfectly fine, all of the IO mortgages will have adequate repayment plans in place ready to conclude the loan, all after rigorous checking by the lender at the time the loan was acquired.-_-

Why would the lenders care, they own the first charge on the home and they make more from IO than repayment.....why would they want a home owned? then their income is lost....have to find a new willing borrowers.;)

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'Linda needs to have a difficult conversation with her son. The expectation was that one day, he would inherit the family home in London where she still lives. But her decision to take out an interest-only mortgage of £182,000 nearly a decade ago has effectively cost him his inheritance ......'

Few questions were asked when the 66-year-old part-time school teacher took ....'

OK, why is a then 56 yo part time teacher taking out a ~200k loan? You know, 4 years before she was probably planning on retiring. Did she expect to become a fulltimeGS trader in those 4 years?

Stupid fcing bint. There's nothing to inherit, just debt.

 

 

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    “I’ve had a letter from my lender asking what I intend to do, but I’ve ignored it,” she says, admitting she has no way of paying off the debt. “It gives me headaches just to think about it.”

Dear bank. I can not consider paying my debt as it gives me a headache. Love Linda xxxxx

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 "Gary, a self-employed fitness instructor, is one borrower worried about his interest-only mortgage. He’ll soon have to hand over a lump sum of £129,000 to his bank, but it is money he doesn’t have.

We didn’t have things explained to us,” says Gary, who lives with his wife and daughters in Luton. “Anyway, our hands were kind of tied at the time — it was more or less our only option.”'

 

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6 minutes ago, spyguy said:

 "Gary, a self-employed fitness instructor, is one borrower worried about his interest-only mortgage. He’ll soon have to hand over a lump sum of £129,000 to his bank, but it is money he doesn’t have.

We didn’t have things explained to us,” says Gary, who lives with his wife and daughters in Luton. “Anyway, our hands were kind of tied at the time — it was more or less our only option.”'

 

The biggest financial decision you will ever make and you didn't bother to check the details or ask how he was going to pay of the principle?? I'm calling BS on this one.

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1 minute ago, JustAnotherProle said:

We didn’t have things explained to us,” says Gary,

I know some concepts in real estate financing are hard to get your head around Gary, but just what part of Interest Only did you not understand ??? 

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2 minutes ago, JustAnotherProle said:

The biggest financial decision you will ever make and you didn't bother to check the details or ask how he was going to pay of the principle?? I'm calling BS on this one.

Or look up 'IO'.

Yep. Just ass covering crap, waiting for a bail out.

 

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Just for a bit of balance, my interest only mortgage has been much cheaper than renting. However, I did have a decent deposit so was able to get a low interest deal on an amount somewhat less than the price of the house.

Its not something I'd fancy doing if I had a 95% LTV, or didn't think my wage would be enough to eventually pay off the debt.

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3 minutes ago, JustAnotherProle said:

The biggest financial decision you will ever make and you didn't bother to check the details or ask how he was going to pay of the principle?? I'm calling BS on this one.

I will be repeated 1000's of times across the land.

Some think that because its a mortgage that the principal is being paid, they only understood the monthly payments. 

Yes, there are people this thick out there. 

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I am rather enjoying these articles.

It comes on the same day that the radio told me that more people would fly off on holiday than ever before and our airspace was at peak aircraft movements.  Sod the fact that many of these holidays are paid for with credit; sod the fact that aircraft are a major cause of global warming/environmental damage; sod the fact that our economy is teetering on the edge; just go on holiday!  Hang on, maybe that's a good idea after all.

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38 minutes ago, JustAnotherProle said:

It's perfectly fine, all of the IO mortgages will have adequate repayment plans in place ready to conclude the loan, all after rigorous checking by the lender at the time the loan was acquired.-_-

Where is Eric with his big red LL letters anyway?

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4 minutes ago, Unexpected said:

Just for a bit of balance, my interest only mortgage has been much cheaper than renting. However, I did have a decent deposit so was able to get a low interest deal on an amount somewhat less than the price of the house.

Its not something I'd fancy doing if I had a 95% LTV, or didn't think my wage would be enough to eventually pay off the debt.

IO can work for some people, but when its used to reduce the monthly payments to just under the applicants maximum affordability, then maybe that applicant cant affors to buy the property.

Throw in HTB/shared ownership and a bit of self cert and its going to be carnage for some.

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Don't see this as a huge issue tbh. They will do what they always do which is kick the problem into the long grass.

People who have no plan will just be shoved onto repayment mortgages and will be forced into paying mortgages for the rest of their lives. Once they die the properties will be repoed by the bank. 

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8 minutes ago, Monkey said:

Some think that because its a mortgage that the principal is being paid, they only understood the monthly payments. 

Yes, there are people this thick out there.

I've never had a mortgage, but I've seen what popped up my wife's laptop screen when she had an investment property 10 years ago and was logged into her bank site.

It clearly stated the $$$ amount left outstanding on her mortgage.

Surely every IO debtor, no matter how thick they possibly were, would log into their bank account occasionally and notice over time that their mortgage was not decreasing, just staying the same, in spite of ongoing monthly payments ?? If they really were that thick then they shouldn't be allowed to procreate. 

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4 minutes ago, dpg50000 said:

If any of these people get a bailout, I will quit work and live very frugally off my savings. thus depriving the treasury of lots of future tax.

This kind of sentiment is often said in jest on this site, but its actually a very real feeling. 

I left the United Kingdom in 2011 because I genuinely felt, entirely sincerely, that the British powers that be were deliberately coercing me into a situation where I either had to go up to my eyeballs in debt and get on the London Housing ladder (against every instinct I had) , or, alternatively, I would refuse to do so and would then see myself become poorer in real terms, year over year over year. 

I refused to play the game: scored a job in the Arabian Gulf and then gleefully and enthusiastically moved every financial asset I had in the UK offshore.

My total financial holdings in Britain now add up to more or less the price of a good night in a Soho brothel. 

Its been 6 years, but I still feel a profound personal satisfaction that I am not having a gun put to my head to play a financial game I manifestly do not believe in and am convinced will lead to much national ruin. 

 

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3 minutes ago, winkie said:

Low secured protected rent and saving has to be better than high debt continuous indebtedness, spending and no saving......;)

It is for the average person but not the banks/government..clearly.

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1 hour ago, spyguy said:

'Linda needs to have a difficult conversation with her son. The expectation was that one day, he would inherit the family home in London where she still lives. But her decision to take out an interest-only mortgage of £182,000 nearly a decade ago has effectively cost him his inheritance ......'

Few questions were asked when the 66-year-old part-time school teacher took ....'

OK, why is a then 56 yo part time teacher taking out a ~200k loan? You know, 4 years before she was probably planning on retiring. Did she expect to become a fulltimeGS trader in those 4 years?

Stupid fcing bint. There's nothing to inherit, just debt.

 

 

The sickening thing here is how it's assumed you'll be able to leach of mum and dad when they're dead. I've told my parents that if they die with a net positive wealth they've done life wrong as I don't expect a penny. Anything I get will be "nice".

That said, what a selfish cow, not thinking of her child and buying a home. Oh the shame!

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9 minutes ago, JustAnotherProle said:

It is for the average person but not the banks/government..clearly.

Quite....and you have to ask yourself why?;)

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Just now, scb said:

The sickening thing here is how it's assumed you'll be able to leach of mum and dad when they're dead. I've told my parents that if they die with a net positive wealth they've done life wrong as I don't expect a penny. Anything I get will be "nice".

That said, what a selfish cow, not thinking of her child and buying a home. Oh the shame!

Good strategy. Lull them into a false sense of safety .. then feed them toadstools and get the house!

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