Monday, August 2, 2010

Oh dear – pear shaped Monday…

Should IO loans be switched to repayment?

The fire sale will be spectacular.

Posted by chrisch @ 09:30 AM (1854 views)
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7 thoughts on “Oh dear – pear shaped Monday…

  • Funny how Ms Bourke describes people who are up to their necks in debt, and without a repayment vehicle, as ‘sophisticated’

    I can think f much better words: ‘dumb’ – ‘gullible’ – ‘easily led’ – ‘reckless’ …

    ..what’s so sophisticated about being hopelessly in debt?

    RC To speculate !

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  • Ironic that the advertising banner at the top of this thread reads “dont get fleeced by your mortgage lender”

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  • mark wadsworth says:

    “should” is one of my most hated words.

    In this case, the answer is “Yes of course”, but all the banks are doing is softening up the general public and politicians for more desperate measures to prop up house prices, like cutting council tax even further and extending and pretending with the Special Liquidity Scheme etc etc.

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  • “many of whom took out an interest-only loan because the monthly repayments were lower and it meant they could afford a larger loan. These borrowers probably hoped that when they came to move house they would have more equity in the property as a result of rising house prices – in spite of the fact that they had repaid none of the capital. This is now looking increasingly unlikely. ”

    As I have have suspected – many home purchaser ‘borrow’ with no plan to pay back the loan, but rather expect the HPI to give them free money,

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  • Seems the wrong way round to me, they should be limiting interest only mortgages on loans BELOW £500k, not above, since it’s those below £500k that make up the bulk of the house price inflation market, and its those people who are more likely to lose their jobs, being not financially independent.

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  • What a load of B.S. – The article is not about banks “forcing interest-only customers onto repayment” – a) they shouldn’t care, they make their book at the outset; and b) they cannot force this as there has been a contract (of course if the terms are breached they can). There is only the reason that is written between the lines (add pressure to keep/add props to prices)

    Aside: There is no fundamental issue with someone renting from the bank (interest only with no plan for repayment) so long as they have a plan for when they have no income stream (i.e. how to pay for their care-home or retirement flat), and really that is a separate issue – after all a landlord has no moral obligation to require his tenant to have such plans in place.

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  • tenyearstogetmymoneyback says:

    The Government / FSA / BoE should never have allowed this to happen in the first place
    (with possible short term exceptions for people who genuinely can’t afford to pay due
    umemployment or illness) for the following reason.

    As I have pointed out before the traditional model was that once people reach their fifties
    (or so) they should have paid off their mortgages and start saving thus providing money for
    first time buyers to borrow. If this doesn’t happen then after a while (years) you will reach
    the point where there are no savings left for people to borrow and the whole thing grings to
    a halt.

    You would have thought they would have learnt from Endowment mortgages. What went wrong there
    was that when interest rates went down people spent the difference rather than using it to pay down
    the mortgage, which is what they should have been doing as low interest rates coincided with low
    stock market growth.

    That said an endowment which will pay off half your mortgage is infinitely better than nothing at all.

    Finally as a follow up to the point above, how many of these mortgages are for a fixed term ? Surely when
    that ends the bank can do what they like.

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