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Interest Only Mortgages


Ed the Wool

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I'm binning mine off as we speak, moving to capital repayment.

I'm convinced there's a mini-storm coming in a year or so when rates start to rise and people aren't prepared for it.

 

A lot of younger people (including myself) haven't had to cope with interest payments at a "normal" level of rates.

 

You definitely want to get out of interest only. Mug's game that.

Agree - a poor decision on my part to do it that way initially. Largely through my own ignorance.

Live and learn.

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I'm after shifting mine to interest only, I tried a couple of years back but the banks had tightened up, had to show ability to repay at the end.

Yeah, I'm pretty certain 'sale of property' is no longer acceptable as a repayment vehicle. Definitely wasn't when I was at LloydsTSB a few years ago.

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I'm after shifting mine to interest only, I tried a couple of years back but the banks had tightened up, had to show ability to repay at the end.

 

 

lending rules having just got worse, you lucky people !

 

if you're on a repayment product and want to go to interest only without any repayment product in place, then you've little chance

 

 

 

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lending rules having just got worse, you lucky people !

 

if you're on a repayment product and want to go to interest only without any repayment product in place, then you've little chance

 

what was the thinking behind the rule changes and other than keeping payments lower what's the benefit of interest only

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Cheers for the replies.

 

What i/o allowed me to do was get on the ladder a few years back without having a massive lump sum as a deposit. It also meant that while I was on a relatively low salary, I could cut back on other things but stay on the ladder. I'd have no chance if I was trying to buy now, it's just pure luck that I'm not.

 

It also meant that becuase repayments were low if I needed to let it out for any reason (e.g. I get posted abroad) there's a lot more breathing room each month if the property is vacant, or some bill comes in that makes things tight.

 

I/O was a risk of course, but with prices steadily rising and higher demand than supply it always seemed like a calculated one.

 

Christ knows how kids without parents who are loaded afford flats in London these days. The prices are mental.

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People's houses were no longer as likely to cover the loan value.

 

which is mad when you think the term these things get taken out over. That said I'm glad I'm doing capital repayment because there's little chance mine would cover it

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what was the thinking behind the rule changes and other than keeping payments lower what's the benefit of interest only

 

 

sometimes people had other repayment vehicles, maybe large pension pots, stocks and shares, that may have made it cheaper or more tax efficient than a repayment mortagge, albeit more risky.

 

When i was working in sub prime mortgages, often it was switching people from Capital and Interest to Interest only just to keep a roof over their heads as for whatever reason theyd fallen on hard times and simply couldnt afford a repayment mortgage, so they would switch to interest only to help stop a repossesion, then either put the house up for sale or switch back to C&I when their finances improved

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what was the thinking behind the rule changes and other than keeping payments lower what's the benefit of interest only

 

the mortgage market review

 

http://www.fca.org.uk/firms/firm-types/mortgage-brokers-and-home-finance-lenders/mortgage-market-review

 

 

 

 

Interest Only gave more flexibility to the borrower in how they'd pay off the capital but in the main it was used by people to get on the property ladder when otherwise they wouldn't have been able to afford a repayment mortgage

 

 

 

 

bit like why many people took out endowments back in the day - so no doubt some c*nt like Martin Lewis will be leading the charge on a mis-selling scandal in years to come

 

 

 

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OK, but that's what I was told at credit policy meetings at Lloyds/C&G.

 

that only really looks at the situation from the lender's perspective

 

sale of the property was an acceptable 'repayment vehicle' for some lenders but the MMR is about protecting the consumer

 

 

 

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Interest Only can work for some people, as long as you know what you're doing - not suitable in the long-term for anything like the numbers who took them out.

 

I guess that the recent/ongoing changes to pension rules will have helped quite a few people stumble into an easier method of repaying the capital at the end of the term.

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With Inflation low interest rates will eventually rise around 2016 but they won't rocket to 1980's levels and trap large amounts of people in unaffordable mortgages.

 

 

Half the 'experts' don't know what rates will do, the other half don't know they don't know what rates will do.

 

MMR is a pile of horseschit put together by clueless ill informed twaats who's sole objective is to show how tough they are. People much over 50 are largely f*cked now, regardless of having a sound exit strategy, mortgage affordability calculations are made on a repayment basis on a high default rate until state retirement age so even if interest only is generally available it doesn't fit on affordability. The clients may well be able to derive income from their business without working, or have repayment vehicles or a million quid in equity, they ignore that completely.

 

Most everything else in this thread is accurate, Cobs has it boxed off.

 

Yeah, I'm pretty certain 'sale of property' is no longer acceptable as a repayment vehicle. Definitely wasn't when I was at LloydsTSB a few years ago.

 

 

It still can be in certain circumstances but the conditions rule out most people.

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I'm just going on what the Bank of England are saying Murphman.

 

 

I realise that and I wasn't having a go, just pointing out things can and do happen that throw the best laid plans into disarray, forecasting future levels of interest rates is what people love to do, they never learn.

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