Monday, Nov 23, 2015

Interest-only a ticking debt timebomb

Business Insider: We'll all pay for the huge mistakes we're making in the UK housing market

>> "The Citizens Advice Bureau warned that 934,000 UK home owners have no plan for payong off the principal on their interest only mortgage. Britain could encounter the first round of these problem owners in 2017."
Interest-only loans fuelled the 80s housing bubble, allowing borrowers to bid up prices more an the high interest rates would otherwise have allowed. While most of these price excesses were cleansed by 1996, the underlying debt is still out there, waiting to catch up with generation debt, most of whom are approaching retirement.
Should be interesting. Maybe lenders will extend their loan terms?

Posted by debtserf @ 09:14 PM (5755 views)
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10 Comments

1. Striebs said...

Sobering article .

Nothing particularly new but hilights the personal tragedy which is starting to unfold in earnest .

Liverpool Care Pathway get ready , here they come .

Monday, November 23, 2015 10:27PM Report Comment
 

2. i remember the 90`s said...

Should be interesting but no excuse we were in that situation 18 years ago and sorted it out as soon as we realised it did not cause a lot of financial pain and those that just ignored it hoping it would go away are going to have to suck it up.imo

Tuesday, November 24, 2015 07:33AM Report Comment
 

3. taffee said...

Halifax building society held a third of all mortgages when 90s crash came and survived huge interest rates hitting
The market unscathed....how things have changed where we are scared to raise rates 0.25% in case everything collapses

Tuesday, November 24, 2015 07:46AM Report Comment
 

4. jack c said...

The major providers in the mortgage market are being encouraged to develop products to allow people to borrow beyond normal retirement age. Couple this with the growth in Equity Release products and there is a 'kick the can down the road' fix to the interest only problem.

More spin on a silly game @ www.mortgagestrategy.co.uk/can-lenders-develop-the-right-products-for-older-borrowers/

Tuesday, November 24, 2015 08:43AM Report Comment
 

5. mombers said...

How do renters cope with year on year increases in rents? I'm not convinced that so many people will actually struggle. They'll cut back on spending or work more if rates rise. The former will be damaging to the economy of course but should actually limit the extent of rate rises required to cool the economy. And will be fairer than the current situation where the government is throwing the kitchen sink at homeowners while renters can suck it. I won't be surprised if more props will be added though...

Tuesday, November 24, 2015 10:58AM Report Comment
 

6. Exec said...

whys it a time bomb ?

Most of these people got their homes at a low price, so if they sell they've got far more money than they started with.

Its not really rocket science,

love the way its spun as a negative lol.

Tuesday, November 24, 2015 11:49AM Report Comment
 

7. stillthinking said...

There is a wave of asset restricted oldies about to break upon the shore.

So what, the banks will either voluntarily or be forced by government to switch them to repayment mortgages, and there will be no requirement to clear the mortgage only that the payments are affordable and do not cause forced sales. All the delay whittles the debt away. Clearly the government will intercede as and when required, if the alternative is a million households being forced to sell at the same time. I have completely lost any belief that the market will be allowed to clear.

Tuesday, November 24, 2015 02:06PM Report Comment
 

8. hpwatcher said...

''Will interest rates ever rise?'' - That's the question.

Tuesday, November 24, 2015 02:35PM Report Comment
 

9. stillthinking said...

Yes interest rates are a better hope. Or just forget about the south east, the rest of the place seems to have returned to normal.

So on that theme of how ridiculous the 400,000 target is. There is ALREADY a target of 200,000 which is impossible to reach and about which the government has done nothing, zero to encourage new builds.

So even though missing the 200,000, the government blithely announces now the target is 400,000. Crackers.

Can you imagine going to the bank and saying yes well probably I can't pay that 10K back I might be able to manage about 6K, but I was thinking maybe my paying back target should be 20K instead,

Thursday, November 26, 2015 01:45PM Report Comment
 

10. Francois said...

I would like to immigrate to Canada but before applying would first like to have a job offer. I applied to numerous companies which I think have LMIAs but I have not heard even one word back. Has anyone had this same experience? I'm getting frustrated and am wondering if its even possible to find a job in Canada as an overseas worker.

Monday, November 30, 2015 06:52AM Report Comment
 

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