Saturday, April 12, 2008

Mortgages for Ostriches

More bury heads in interest-only mortgages

One in three mortgages is now being taken out "on the never never" and interest-only home loans have doubled in popularity during the last five years, The Daily Telegraph can reveal.

Posted by quiet guy @ 02:18 PM (944 views)
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12 thoughts on “Mortgages for Ostriches

  • Considering the banks have already spent all our savings anyway, I would say and interest only mortgage is a good option. After all, the government will protect home owners over savers.

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  • If you ever wanted proof that many of the UK’s citizens literally cannot afford their lifestyles then this is it. Interest only mortgages are part of the house price ramping phenomenon we have witnessed over the last 10 years. People stretching themselves with ‘interest only’ mortgages have only served to price other more prudent folks out of the housing market or into unsustainable debt.

    Interest only products should not be classed as mortgages and should never have been marketed as such.

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  • David Stubbins says:

    I know what some good news would be.
    You have decided to shut down the HPC website before it gets more ridiculous and more ridiculed.
    Dave

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  • I would love to see a proper analysis of the UK mortgage market – type/amount/LTV/age of borrower/default rate – but I don’t know of one that’s online.

    Piecing together odd bits and pieces of data leads me to estimate that the most indebted quarter of borrowers are carrying roughly half the total mortgage debt. Moreover, I suspect that this sector is overwhelmingly on interest-only deals.

    As the market falls, it will be these people who do the real damage to the lenders balance sheets.

    Interest only used never to be offered to borrowers when they applied for a mortgage, but was a useful fall-back option when couples split up and the party remaining in the mortgaged property needed time to either sell up or get a new partner.

    Ultimately it will be realised that this is not a prudent form of lending. No-one should be sold a mortgage that takes more than 25 years to pay off, or takes the applicant past their 60th birthday. We will doubtless have a new finance act in the aftermath of this mess – hopefully some prudent restrictions can be written into law.

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  • gone-to-colombia says:

    U Tom, I could not agree more.

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  • Who the fugg is David Schmubbins?

    And when and where has this site ever been ridiculed? And surely if it ever had been ridiculed, those doing the ridiculing would be eating their Krusty sized hats at the moment?

    Honestly, some people. Couldn’t disguise the fact that they’re a VI in a mad panic if their lives depended on it.

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  • But interest only mortgages without necessarily having a repayment method have been prevalent for the last ten years and I’ve always believed that this will be our own sub-prime as time ticks on. Suddenly banks and building societies didn’t seem to care whether anybody had the necessary vehicle to pay the actual loan. In addition they started performing drive-by valuations rather than actually setting foot into a house! I think interest only mortgages will turn out to be a scandal on a par with endowments.

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  • crash bandicoot says:

    Interest only is supposed to be for the financially savy, but is mainly used by the financially incompetent……….

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  • it_is_going_with_a_bang says:

    The problem is that BTL have used Interest only as a tool to buy property relying on the capital gain to make the ‘profit’ from it.
    Prices have risen to reflect this and far beyond it. So if you want to buy a property what choice have people had other than not to buy or take the only loan they can with Interest only.
    The bottom line has been the monthly repayment not the overall cost of the property, value for money or the ability to actually pay off the loan. Which is why sooo many people are now in so much trouble. They believed interest rates would forever be lower and lower ( another Brown im so great illusion ).

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  • new user 2007 says:

    David Stubbins,

    Being ridiculed by someone of an IQ as low as yours is an honour. What is the matter? Had time on your hands because no one came into your estate agency today?:)

    The start says can “reveal”. This has been going on for so long it is old news. Brokers telling everyone rates would stay at 4.5% so take out 6* income is hardly new.

    What is coming to light to the mainstream is that they were talking rubbish. It_is_going the BTL took over mortgage demand since they wiped out FTB. They are indeed interest only.

    Luckily, they are seeing financing options collapsing (talk of low defualts is great but BTL had low defualt in NR as well) and leveraging is about to hit them just as bad on the way down as they saw on the way up.

    It is nice to see a rise in VI types coming here because they have nothing else to do in a dead market. Welcome. Sadly, it does not take many like that joining to bring the average IQ of the site membership down lol.

    I do ask that you chill out a little though:)

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  • new user 2007 says:

    p.s. 6* income means you can only afford interest only. How crazy was that as a multiple and in terms of guaranteeing no financial cushion.

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  • @Mr Stubbins

    I note that comments expresing similar sentiments have been posted by ‘David Stubbins’ at
    http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=428513&in_page_id=57&expand=true

    Assuming that you are the same person, then your are roughly 60 years old and hence bought your house in a vastly different situation to that facing first time buyers today. I can understand a certain amount of disdain towards today’s younger generation but what multiplier did you buy you’re house at I wonder? Would you be able to do the same thing now?

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