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FabulousSophie

Time for a comeback? Mortgage lenders return to interest-only

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1 hour ago, nome said:

They've never gone away, a friend of my parents has just got one, she's 60 with terminal cancer.

I assume this is a specialist case and there will be an insurance policy in place?

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100% mortgages are back in Spain. The¬† banks still have a massive amount of repossessed houses and they can't take any price drop. They have run out of buyers so since about March they brought back the 100% mortgage. Strictly controlled under full supervision and governance obviously¬†(pretend)¬†ūüôĄ¬†

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Maffo in Oxford, on his housebuilders thread, has said it's a bit of a mystery how people are suddenly stretching to 500k mortgages. Wonder if it's the return of io? I realise the regulation should prevent this, but really, are there holes?

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9 minutes ago, Si1 said:

Maffo in Oxford, on his housebuilders thread, has said it's a bit of a mystery how people are suddenly stretching to 500k mortgages. Wonder if it's the return of io? I realise the regulation should prevent this, but really, are there holes?

I will try and dig deeper to find out what is going on.

Not many couples in their early 30s with jobs such as a school teacher, or middle management, can realistically afford the typical £500k for 4-5 beds in Oxford. They struggled with the first rung at £300k!

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7 minutes ago, maffo in oxford said:

I will try and dig deeper to find out what is going on.

Not many couples in their early 30s with jobs such as a school teacher, or middle management, can realistically afford the typical £500k for 4-5 beds in Oxford. They struggled with the first rung at £300k!

Appreciated. It's depressing :)

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There is an argument for interest only mortgages for high earners from a tax efficiency perspective.

Chucking the equivalent of £20000 a year (differential between IO and Repayment on a 600K Mortgage) into a pension which then attracts on average an extra 50% tax relief (another 20K) is worth a lot more to a 120K+ earner than using a repayment mortgage.

The tax free lump sum at 55 can then be used to pay down a hefty component of the mortgage, and then the final 10 years can be on a repayment basis.

This is what I will be looking to do to maximize tax savings assuming a Bank sees it my way as and when I buy my first property.

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Provided unceasing vigilance is exercised, there will be no issue.

I have every faith in the Bank of England and the financial authorities.

Edited by Errol

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4 hours ago, Si1 said:

Maffo in Oxford, on his housebuilders thread, has said it's a bit of a mystery how people are suddenly stretching to 500k mortgages. Wonder if it's the return of io? I realise the regulation should prevent this, but really, are there holes?

Had a sudden rush of overpriced family houses in my area go in the last couple of weeks

450k (2014/15) and on the market 550-700k + and about 4-5 of them have all SSTC at once.

http://www.rightmove.co.uk/property-for-sale/property-64987291.html

http://www.rightmove.co.uk/property-for-sale/property-70293833.html

http://www.rightmove.co.uk/property-for-sale/property-54597069.html

http://www.rightmove.co.uk/property-for-sale/property-52203807.html

http://www.rightmove.co.uk/property-for-sale/property-54215160.html

none have completed as of yet but its a bit strange how they have all gone at the same time.

incidentally all older couples no families....Kid free zone either wealthy professionals dont have kids or you need a pre 1999 purchased house.

Edited by Fromage Frais

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1 hour ago, Quicksilver said:

There is an argument for interest only mortgages for high earners from a tax efficiency perspective.

Chucking the equivalent of £20000 a year (differential between IO and Repayment on a 600K Mortgage) into a pension which then attracts on average an extra 50% tax relief (another 20K) is worth a lot more to a 120K+ earner than using a repayment mortgage.

The tax free lump sum at 55 can then be used to pay down a hefty component of the mortgage, and then the final 10 years can be on a repayment basis.

This is what I will be looking to do to maximize tax savings assuming a Bank sees it my way as and when I buy my first property.

Rational sure.

Bur How can this be achieved without applying upward pressure on house prices?

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49 minutes ago, hotblack42 said:

Rational sure.

Bur How can this be achieved without applying upward pressure on house prices?

I assume by falling back on Lending multiple limits as a hard cap. So max 4.5x lending based on (Salary + Pension contributions) would mean no-one could borrow MORE on interest only. My view is not to borrow more, but to borrow the same amount I would otherwise be able to on repayment but do it more tax efficiently.

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Mortgage lenders return to interest-only taking everyone's money and renting them out a house. 


That's the truth of the matter. :lol::lol::lol::lol::lol:

 

 

Edited by TheCountOfNowhere

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2 hours ago, Quicksilver said:

There is an argument for interest only mortgages for high earners from a tax efficiency perspective.

Chucking the equivalent of £20000 a year (differential between IO and Repayment on a 600K Mortgage) into a pension which then attracts on average an extra 50% tax relief (another 20K) is worth a lot more to a 120K+ earner than using a repayment mortgage.

The tax free lump sum at 55 can then be used to pay down a hefty component of the mortgage, and then the final 10 years can be on a repayment basis.

This is what I will be looking to do to maximize tax savings assuming a Bank sees it my way as and when I buy my first property.

There's an argument that banks should be wary of lending too much beyond multiples of the local median income.

Reasoning there is there's no guarntee people will be well paid in the future.

 

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3 minutes ago, spyguy said:

There's an argument that banks should be wary of lending too much beyond multiples of the local median income.

Reasoning there is there's no guarntee people will be well paid in the future.

 

I don't think banks are into the business of stockpiling property, for example see Spain, they can't offload it that easily.....  www.inspain.today/bank-repossessed-houses-for-sale-in-spain.

Interest only I would think would be specialist lending low LTV, low risk lending...those prepared to pay more overall....;)

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2 minutes ago, winkie said:

I don't think banks are into the business of stockpiling property, for example see Spain, they can't offload it that easily.....  www.inspain.today/bank-repossessed-houses-for-sale-in-spain.

Interest only I would think would be specialist lending low LTV, low risk lending...those prepared to pay more overall....;)

Metrobank and Halifax and HSBC all doing IO mortgages with 5 year fixes around the 1,99% to 2.14% range on 75% LTVs. its a product thats sensible for a certain profile of customer only I agree.

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6 minutes ago, Quicksilver said:

Metrobank and Halifax and HSBC all doing IO mortgages with 5 year fixes around the 1,99% to 2.14% range on 75% LTVs. its a product thats sensible for a certain profile of customer only I agree.

When I say pay more overall I don't mean the rate of interest.....I mean the amount owed stays the same, it is not reduced over time, the o/s debt still has to be paid at some point in the future.......if anyone can afford to repay today at ultra low interest they should be paying off as much as possible so that the actual debt is being reduced, creating their own equity.....;)

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2 minutes ago, winkie said:

When I say pay more overall I don't mean the rate of interest.....I mean the amount owed stays the same, it is not reduced over time, the o/s debt still has to be paid at some point in the future.......if anyone can afford to repay today at ultra low interest they should be paying off as much as possible so that the actual debt is being reduced, creating their own equity.....;)

I respectfully disagree. In the example I espoused above, 5 years of amortizing loan repayments saves you £5K in reduced interest payments versus losing £50K in pension tax relief. its a no brainer from an opportunity gain/loss perspective. its 10x more lucrative before factoring ANY growth in your pension fund over that 5 year period.

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7 minutes ago, Quicksilver said:

I respectfully disagree. In the example I espoused above, 5 years of amortizing loan repayments saves you £5K in reduced interest payments versus losing £50K in pension tax relief. its a no brainer from an opportunity gain/loss perspective. its 10x more lucrative before factoring ANY growth in your pension fund over that 5 year period.

Depends on your individual circumstances.....tax band, pension you have/job you do.......the sooner pay back debts the more can pump into a pension......just because reducing debt doesn't mean not paying something into a pension....perhaps banking on the pension to pay back debts?....who knows how well markets will perform in the future, once a debt is repaid it is repaid........;)

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9 minutes ago, winkie said:

Depends on your individual circumstances.....tax band, pension you have/job you do.......the sooner pay back debts the more can pump into a pension......just because reducing debt doesn't mean not paying something into a pension....perhaps banking on the pension to pay back debts?....who knows how well markets will perform in the future, once a debt is repaid it is repaid........;)

Exactly, hence why I said in MY example to counter your statement earlier:

" .....if anyone can afford to repay today at ultra low interest they should be paying off as much as possible ..."

Appreciate not many are in the position to potentially lose their personal allowance or even get 40% or 60% tax relief on pension contributions but if they are, your advice may not be very sound financial planning imo.

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57 minutes ago, Quicksilver said:

Metrobank and Halifax and HSBC all doing IO mortgages with 5 year fixes around the 1,99% to 2.14% range on 75% LTVs. its a product thats sensible for a certain profile of customer only I agree.

Im not sure of the HSBC but, after speaking to them (well, First Direct) only 2% of the UK pop would be considered.

For Halifax:

https://www.halifax.co.uk/mortgages/mortgage-information/repayment-methods/

As beary has said - these are not the IO mortgages of 2002-2012ish.

The Halifax is demanding *proof* of a plan/investment to pay it back.

The correct name for these would be 'IO mortgage with a 3rd party investment/repayment plan'

Metrobank.?

I think a 10 year mortgage will outlast the bank ....

 

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3 hours ago, Fromage Frais said:

Had a sudden rush of overpriced family houses in my area go in the last couple of weeks

450k (2014/15) and on the market 550-700k + and about 4-5 of them have all SSTC at once.

http://www.rightmove.co.uk/property-for-sale/property-64987291.html

http://www.rightmove.co.uk/property-for-sale/property-70293833.html

http://www.rightmove.co.uk/property-for-sale/property-54597069.html

http://www.rightmove.co.uk/property-for-sale/property-52203807.html

http://www.rightmove.co.uk/property-for-sale/property-54215160.html

none have completed as of yet but its a bit strange how they have all gone at the same time.

incidentally all older couples no families....Kid free zone either wealthy professionals dont have kids or you need a pre 1999 purchased house.

I've seen this before and especially in around 2008 when we thought we were getting the crash.....

I think it's because an EA has closed a branch and another local branch takes on their stock so it shows all their SSTCs plus their current stock.

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I just saw this article in Money Saving Expert about the Treasury Select Committee pushing for action from the FCA for so called 'mortgage prisoners':  https://www.moneysavingexpert.com/news/mortgages/2018/06/regulator-under-fire-for-lack-of-urgency-on-mortgage-prisoners Maybe a first relaxation of the mortgage affordability rules is being planned. I hope not, since it could be a first step down a slippery slope.

 

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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