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IO, the next mis-selling scandal

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That 2025 spur for repayments though

giphy.gif

Well, remember back in 2015 we all said the sob stories would start. 

They've begun in earnest.

Edited by Tapori

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A decent piece of analysis. What it doesn't really get into is what percentage are unable to repay. It's going to be far more than thousands. More than tens of thousands. I think it will be closer to 400,000. Perhaps many more. 

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Hard to see how IO can be classified as misselling though. The name itself is pretty explicit. 

Interest. Only. You're paying only the interest.

and wasn't there an exercise a few years back where everyone had to 'confirm' that they had  a repayment vehicle in place?

If these people get bailed out with keeping their houses if they can't clear the debt at the end of the term I will be less than happy!

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Victims! Victims? VICTIMS?!

I'm sorry but I'm going to invoke Venger here. They are not victims. They either failed to properly assess or ignored the risk and made their decisions.

Speaking as someone priced out by many of these peoples irrational bids I've got more grounds to describe myself as a victim, though I don't have any desire to do that. I chose my path and I'm taking the consequences which at the rate of this slow motion crash will very likely mean some financial loss.

What ever happened to personal responsibility?

 

 

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IMO they'll reintroduce a form of miras if they have to more than trivial interest rate rises.  Actually, I think they might make it apply to all debt, not just mortgage.

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5 minutes ago, dgul said:

IMO they'll reintroduce a form of miras if they have to more than trivial interest rate rises.  Actually, I think they might make it apply to all debt, not just mortgage.

There's a general intellectual rejection of interest tax relief in policy circles, AFAIK. I suspect this if unlikely.

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52 minutes ago, RentingForever said:

Hard to see how IO can be classified as misselling though. The name itself is pretty explicit. 

Interest. Only. You're paying only the interest.

and wasn't there an exercise a few years back where everyone had to 'confirm' that they had  a repayment vehicle in place?

If these people get bailed out with keeping their houses if they can't clear the debt at the end of the term I will be less than happy!

I'm sure there are plenty who won't mind admitting to being so stupid that they didn't understand, and will claim that nobody explained it properly.  Or else won't mind pretending that they were too stupid to understand. 

The big question is, will it wash?  It's rather different IMO from PPI, where the charges were apparently often added by stealth to the product. 

In the case of IO, it's the product itself.  I can't somehow see the banks caving into to vast claims of mass stupidity, whether real or pretended. 

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2 minutes ago, Mrs Bear said:

I'm sure there are plenty who won't mind admitting to being so stupid that they didn't understand, and will claim that nobody explained it properly.  Or else won't mind pretending that they were too stupid to understand. 

The big question is, will it wash?  It's rather different IMO from PPI, where the charges were apparently often added by stealth to the product. 

In the case of IO, it's the product itself.  I can't somehow see the banks caving into to vast claims of mass stupidity, whether real or pretended. 

Indeed. Plus I don't think they'll have demographic political influence on their side when tshtf.

Edited by Si1

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13 hours ago, Parkwell said:

Victims! Victims? VICTIMS?!

I'm sorry but I'm going to invoke Venger here. They are not victims. They either failed to properly assess or ignored the risk and made their decisions.

Speaking as someone priced out by many of these peoples irrational bids I've got more grounds to describe myself as a victim, though I don't have any desire to do that. I chose my path and I'm taking the consequences which at the rate of this slow motion crash will very likely mean some financial loss.

What ever happened to personal responsibility?

Victims of their own stupidity/hubris

When I hear an IO sob story:

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17 hours ago, Si1 said:

There's a general intellectual rejection of interest tax relief in policy circles, AFAIK. I suspect this if unlikely.

Same as the intellectual rejection of quantitative easing, reducing interest rates to zero for 10 years, governments buying banks?  If the need arises it'll all suddenly turn into accepted wisdom.

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I said this before, but i bet that a large proportion of IOers also self certified when they shouldnt have, and also lied about their income/outgoings to get the mortgage.

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I work at a bank and we've been told previously that IOs cant be missold, as no one sells them to you, you apply for them. Only if you used an independant financial advisor or a broker could you have been missold.

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3 hours ago, regprentice said:

I work at a bank and we've been told previously that IOs cant be missold, as no one sells them to you, you apply for them. Only if you used an independant financial advisor or a broker could you have been missold.

Pretty much.

All via brokers. You sign a bit of paper to say youve understood the sale.

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16 hours ago, spyguy said:

Pretty much.

All via brokers. You sign a bit of paper to say youve understood the sale.

This is a big one. People made misrepresentations to mortgage brokers and mortgage brokers made misrepresentations to the banks.

Yes we get daft articles (and repetitive threads) about the possibility of a miss-selling scandal, but why don't we get zero post count people starting up threads about hundreds of thousands of mortgage owner-occupiers getting banged up for mortgage fraud and thousands of mortgage brokers suffering a related fate?

With PPI the banks set up a system where they knowingly defrauded their customers and they incentivised their employees to make sure the customers were defrauded. You only need look at Paul Moore's book to get a idea of the extent to which this wrongdoing was known about whilst it was going on all the way up to board level.

I changed my bank account about four years ago (different type of account, same bank). It was ridiculous. The employee had to sit with me whilst I watched a video that explained all the charges. The banks know it was their systems that were the cause of the PPI scandal so they changed their systems after they got caught.

With interest-only mortgage lending (both sold-as self cert and so-called 'fast track') the borrowers deceived the banks and the banks turned a blind-eye to it. If people try to blame the banks then the banks will be able to compare their records of earnings declarations made during the mortgage applications process to other sources of evidence about income. Nobody enjoys the PPI phone calls but good luck trying to set up a business where you cold call people to see if they want to end up with a conviction for mortgage fraud.

Maybe there's a tiny handful of people who could bring a civil suit against a mortgage broker, but did the broker have any professional indemnity insurance? Is the insurance broker still in business? (Or is he a tax exile in Malta?)

Last time I looked through the recent financial ombudsman rulings there was exactly zero evidence of anything doing here, and it has been over ten years. IIRC the usual analysis is that where there's smoke there's fire. What are we expected to infer about the presence of fire from an observation that smoke is absent?

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On 15/09/2017 at 3:57 PM, Si1 said:

Yet it is being talked about.  eg, this was today: https://www.ft.com/content/296227f0-9966-11e7-8c5c-c8d8fa6961bb

Quote

We could cut stamp duty for first-time buyers; or consider re-introducing a targeted version of MIRAS to help young, lower-income people to own their own home

Neil O’Brien, Conservative MP for Harborough and a former adviser to Theresa May and George Osborne.

[IMO the reason they kept base-rate IR deductions for BTL was to give an entry to allow deductions for OO in the future.

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18 minutes ago, dgul said:

Yet it is being talked about.  eg, this was today: https://www.ft.com/content/296227f0-9966-11e7-8c5c-c8d8fa6961bb

Neil O’Brien, Conservative MP for Harborough and a former adviser to Theresa May and George Osborne.

[IMO the reason they kept base-rate IR deductions for BTL was to give an entry to allow deductions for OO in the future.

That's very interesting, fair play. We'll see way the wind blows. Notice the thought of house price falls is anathema to him, apparently.

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http://www.dailymail.co.uk/money/mortgageshome/article-5679831/Len-Val-never-missed-mortgage-payment-face-losing-home.html

Quote

For three years, the couple tried to negotiate with the bank, arguing that they were still able to pay the £770-a-month mortgage bill from their £1,300 joint income and £200 of mortgage interest support from the Government.

 

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