General Chat

As you've no doubt seen in the news ,

"1.3 MILLION with interest-only loans face losing their homes in mortgage 'timebomb'


But what gets me is this, how on earth can so many have believed they would not have to pay it back?

"The report said 65,000 householders believe they were mis-sold the mortgages and claim they had no idea they would be expected to repay the original loan."

Rose ,,,,,,,, :-D,

how do they think they were ever going to pay for their property?

common sense tells anyone who has borrowed a sum of cash,,,,,,it carried interest on top of whats been borrowed,


read the small print,,,,,,,read the small print. :-D

Kay, I believe we were mis-sold an interest only mortgage, and I have common sense thanks.

Like most things, every case is different, but if 65,000 householders believe they were mis-sold there interest only mortgages, obviously something's a miss I'd say.

1,000's were mis-sold loan insurance, so why not interest only mortgages?

When you took out one of these mortgages you also took out an insurance policy which would on its full term payout the amount of the outstanding mortgage

What has happened is that many of these insurance policies were dependant on a buoyant economy and the interest rates remaining high. This has not happened and many of these policies are falling way short of their predicted payout.

My first mortgage was a repayment and even after a couple of years it was clear that the insurance would never pay out the amount it should have.

Luckily when I moved I went on to a repayment mortgate. This finished last month after 14 years. Thanks to the very low interest rates and never adjusting my repayments I paid up the mortgage nice and early. I was lucky and I know that many are not in the same position as me.

You don't need to read the small print it's simple

interest only

Are people that stupid they don't understand the words "interest-only " followed by the word "loan" or "mortgage" would mean anything other than what it says on the tin.

if that's the case then the sooner we move to being a fully subscribed Nanny State the better.

Roy

I'm sure they may well have been mis-sold Lynda, but even so I'd have thought most would realise that the 'capital' part would have to be paid in the future?....either by having an insurance policy , or savings or selling when in positive equity.

It's not quite like the disastrous endowment mortgages where the endowment policy' failed to produce enough cash to pay off the loan when it matured as happened to many. Or the PPI, which was mis-sold in that in many cases you were told you had to take it out or not get the loan at all.

PP, The mortgage you refer to was not an "insurance" linked mortgage, It was as endowment mortgage which meant you paid the endowment to a "assurance" company that invested your premium the thinking behind it was that the investment would return sufficient funds to pay off your mortgage at the end of the fixed term the other payment was your mortgage which you paid the interest only

endowments went bang in the late 1990? if i remember correctly

assurance and insurance are not the same thing

Roy

If you have a young family and are paying £1k a month interest only rather than £1300 for a repayment loan, you may think "the house is increasing in value by £1,000 a month and within another 10 years, children will be leaving home, we will have an extra £120,000 equity in our property and we can sell family house, pay off mortgage and downsize to something cheaper and more appropriate.

You thus have an extra £300 a month to pay for luxuries like gas bill and rates. All of that sounds ok unless 1. house prices fall or remain stagnant 2. one of parents loses their job 3. you want to downsize to a a smaller but quite expensive house of equivalent value.

However these families got in this mess, the lack of movement in the housing market is pushing them over a cliff. Thank goodness there is a reported increase in house prices today. :-)

When my mate split with her partner in the 90's she got an interest only mortgage.

It worked well, she gained a lot of equity on the house and when she met her new partner, sold up and released the equity

My first mortgage was repayable by endowment....what a joke. I switched 13 years ago to a repayment plan (Interest and capital) Just as well. I have kept the endowment policy but its value is less than half of the expected sum!

The endowment is with SL and they made a written promise (When the markets took a down turn) to honour the initial forecast

.........they later retracted that 'promise'

These mortgages were linked to a "With Profits" endowment policy which would pay out on the death of the insured person or at the end of a fixed term. The policy would attract bonuses which together with the original sum insured would at one time be more than sufficient to repay the mortgage. When my endowment policy matured more than 25 years ago there was sufficient to repay my mortgage and leave me with a sizeable amount.
Sadly endowment policies now only pay very low bonuses if any, leaving many people with insufficient funds to repay the mortgage.

the dreaded credit card works much the same......its borrowing,,

someone cant loan you cash to buy a house and not want the full payment back with interest,,,,,,

spend.......payback whats been spent on it,,,only pay just the min which is the interest,,,you still end up owing whats been spent,just because the interests being paid doesnt mean the bank dont want the rest,


I remember the endowment policy against mortgages,they were based on the current trend at the time.,,they did offfer where you could increase to meet any shortfall in due time.

I certainly hope all these people dont lose their homes and can see a way to work with lenders,

Robert. Endowment policies were years ago. In recent years you have often had a choice to pay interest only or repayment. If you opt for interest only, you only need to say that you expect to be able to pay the amount of the loan back.

No one asks you how. Bit like these balloon payments after 4 years of buying a car on HP. Who can easily lay their hands on the balloon payment?

The only legal protection you had with an endowment was that a government guarantee that you would get back a minimum equal to the amount you had paid in

If you died mid term then the house became the property of the mortgage lender and the insurance part of the endowment gave a minimum sum assured on your death

Roy

No, Roy that is not how it worked.

Robert, What part of my post do you refer to?

Roy

Roy

My first endowment mortgage paid upon death:

The settlement on the house and £xxxx life insurance

I agree with Robert. We had an endowment, with profits, policy and the whole point was that, if you died, the policy matured, the mortgage was paid off and the widow/children were not left homeless.

Gins If you still have the papers check what it actualy says with reference to insurance v assurance they are not the same thing people have confused these two terms for years

the government guarantee that you would get back a minimum equal to the amount you had paid in, I think came in late 70s or early 80's because of the insurance companies going bust and leaving people in debt

If you are paying interest only then the house belongs to the mortgage provider until you pay the loan off, That has always been the case if your assurance "sum assured" covers that then you can pay the mortgage off if it doesn't then you cannot,

For info on insurance v assurance see this link below but bear in mind we are talking about the situation several years ago with regard to endowment mortgages


http://www.life-assurance-bureau.co.uk/life-insurance/faqs/what-is-the-difference-between-life-assurance-and-life-insurance-li.htm

Roy

added "sum assured" is directly linked to how your investment is doing so if your investment is under performing then you are stuffed

Roy, What is your experience of the Insurance market?

Roy

My first mortgage (For 'my' home) was 1997 It stands as I said, house paid in full on death, with a 'payment of £xxx on top

I'm much younger than you :-P .....and prettier

;-) <3