Interest Only Mortgage Fools

[purplemonkey]

I can't believe what I've been reading recently, apparently the big mortgage lenders are getting together to have a talk over this interest only mortgage business. Some of them seem to think there might be people out there thinking of sueing due to not realising their interest only mortgage doesn't pay off the house! If any single person gets away with this in the future I will personly do something which will get me locked up for life, that or pay someone to do it for me.

Seriously though people are entering into interest only mortgages because they have been told that house prices only go up! and because of this, interest only is fine. I spoke to a chap the other day, he paid 30k for his house its now worth 150k, if he had interest only mortgage, hey no problem, good for him. but nowadays people are buying interest only because thats all they can afford and because they still think they have to buy a house, so they take the never never option, thinking their house will double in value and they will then be able to use this free cash as their pension and will have enough left over for a little place in the country.

ARE PEOPLE REALLY THIS STUPID THAT THEY CAN SUE SOMEONE IF THIS DOESN'T HAPPEN FOR THEM!! another reason to leave this country, I sometimes think germany should have won the war!

[the end is a bit nigher]

tend to agree - there will be some who will get to the end of the mortgage term and expect to sell and downsize - slightly different to the endowment scenario tho - back then the lender was usually responsible for providing the repayment method - they just pushed the wrong one because it was in their sales-persons interest - IO mortgages clearly state that they won't repay the loan and the borrower has to sign an acknowledgement that they will provide their own repayment method

[numpty]

I can't believe what I've been reading recently, apparently the big mortgage lenders are getting together to have a talk over this interest only mortgage business. Some of them seem to think there might be people out there thinking of sueing due to not realising their interest only mortgage doesn't pay off the house! If any single person gets away with this in the future I will personly do something which will get me locked up for life, that or pay someone to do it for me.

Seriously though people are entering into interest only mortgages because they have been told that house prices only go up! and because of this, interest only is fine. I spoke to a chap the other day, he paid 30k for his house its now worth 150k, if he had interest only mortgage, hey no problem, good for him. but nowadays people are buying interest only because thats all they can afford and because they still think they have to buy a house, so they take the never never option, thinking their house will double in value and they will then be able to use this free cash as their pension and will have enough left over for a little place in the country.

ARE PEOPLE REALLY THIS STUPID THAT THEY CAN SUE SOMEONE IF THIS DOESN'T HAPPEN FOR THEM!! another reason to leave this country, I sometimes think germany should have won the war!

They will only sue if the sun rises.....oh yes and no doubt they will form a pressure group and start lobbying for the writting off of their debt and possibly compensation for all the heart ache it has caused. I have a vision, of the Mail on Sunday in a few years time with these hapless people standing outside their houses expecting the goverment to intervene and help them out.

Shared appreciation mortgages..another example. Here the deal went in favour of the lender and the hapless borrowers all cried "unfair" even though it was spelt out clearly in the offer letters

I do begin to understand why somebody would walk into Macdonalds and shoot everyone in sight

[rogerthelodger]

I can't believe what I've been reading recently, apparently the big mortgage lenders are getting together to have a talk over this interest only mortgage business. Some of them seem to think there might be people out there thinking of sueing due to not realising their interest only mortgage doesn't pay off the house! If any single person gets away with this in the future I will personly do something which will get me locked up for life, that or pay someone to do it for me.

Seriously though people are entering into interest only mortgages because they have been told that house prices only go up! and because of this, interest only is fine. I spoke to a chap the other day, he paid 30k for his house its now worth 150k, if he had interest only mortgage, hey no problem, good for him. but nowadays people are buying interest only because thats all they can afford and because they still think they have to buy a house, so they take the never never option, thinking their house will double in value and they will then be able to use this free cash as their pension and will have enough left over for a little place in the country.

ARE PEOPLE REALLY THIS STUPID THAT THEY CAN SUE SOMEONE IF THIS DOESN'T HAPPEN FOR THEM!! another reason to leave this country, I sometimes think germany should have won the war!

in the eighties you got a funny look when you asked for a repayment mortgage,i remember being shown a graph,by a mortgage advisor,of how the endowment would grow to pay of the capital

i ended up with an endowment mortgage on my first house but never really trusted it! 2 years later when i moved i insisted on a repayment mortgage.

if Germany had won the war at least the trains would have run on time

[warwickbloke]

I can't believe what I've been reading recently, apparently the big mortgage lenders are getting together to have a talk over this interest only mortgage business. Some of them seem to think there might be people out there thinking of sueing due to not realising their interest only mortgage doesn't pay off the house! If any single person gets away with this in the future I will personly do something which will get me locked up for life, that or pay someone to do it for me.

Seriously though people are entering into interest only mortgages because they have been told that house prices only go up! and because of this, interest only is fine. I spoke to a chap the other day, he paid 30k for his house its now worth 150k, if he had interest only mortgage, hey no problem, good for him. but nowadays people are buying interest only because thats all they can afford and because they still think they have to buy a house, so they take the never never option, thinking their house will double in value and they will then be able to use this free cash as their pension and will have enough left over for a little place in the country.

ARE PEOPLE REALLY THIS STUPID THAT THEY CAN SUE SOMEONE IF THIS DOESN'T HAPPEN FOR THEM!! another reason to leave this country, I sometimes think germany should have won the war!

There are also a lot of folk who can't be bothered to even look that far ahead.

The chances of still being married to the same person, working for the same company, having the same government, living in the same house for the next 25 years are fairly slim, all that matters is NOW.

If IO means they can have the house they want now, it's a good thing, like endowment was.

There will always be gullible people believing what suits them.

There will always be the "it'll all work out OK" optimists.

People buying under these conditions may not be making a bad decision after all, it may work out OK for them?

It's impossible to say it won't.

[Fancypants]

I can't believe what I've been reading recently

the one word answer to your original question is - yes.

the larger and more forsighted firms currently dealing with endowment complaints are gearing up for the next thing, and they have identified it as in IO mortgage. The next couple of years will see this shift occur - it is part of the universe's rich intertwined tapestry that this will be happening at the same time as HPC

[bottletop]

The finance industry should have learnt from endowment misselling that you have to explain it to the punter clearly to make sure they understand the cons as well as the pros when buying something.

I would imagine the contracts are clearly worded to make it clear that you are paying off no capital, you must have an investment vehicle in place to pay off the capital at the end, and by signing the IO application you fully understand and accept the risks involved.

If they haven't managed to get it right this time round then they deserve to be truly screwed.

[Fancypants]

The finance industry should have learnt from endowment misselling that you have to explain it to the punter clearly to make sure they understand the cons as well as the pros when buying something.

I would imagine the contracts are clearly worded to make it clear that you are paying off no capital, you must have an investment vehicle in place to pay off the capital at the end, and by signing the IO application you fully understand and accept the risks involved.

If they haven't managed to get it right this time round then they deserve to be truly screwed.

you're right of course, and I imagine the contracts are fairly solid - but what we must remember is that, fundamentally, this will be a political issue. The numbers of people that have (unsuitably) taken out IO mortgages of late are substantial. If a million are seen to be floundering in 3-4 years time, there will be immense pressure on the financial services industry to share some of the pain.