Have read and heard several stories on the news today where they're saying many people with interest only mortgages either don't know what will happen at the end of the term (or they'll owe a huge sum) or haven't made provision.
Anyone with an interest only mortgage in that boat? I'm genuinely curious as it was heavily emphasised to me when I bought first what would happen.
I have an interest only mortgage. I have other payment vehicles to pay it off in 15 years ! If people are stupid enough to take out an interest only mortgage and not realise they need to pay it all back in x number of years they shouldn't get a mortgage full stop. I am fully aware of the implications and do not need the government to police it. My house would cost approx £2100 a month on a repayment, £1900 to rent and I pay £1400 interest only. So basically I am renting my house for £500 less than the market rate, but in 15 years I will have any capital growth unlike someone renting.
What feels very wrong to me is that some people on base rate plus x% are having their mortgages doubled - 100,000 of them - simply because the bank's terms hidden away say that base rate can be any multiple of base rate the bank chooses so what you thought was 2% above Bank of england base rate of 0.5% suddenly becomes 2 % above a new 3% base rate of Bank of Ireland i.e 5%. I really don't think that's very fair on borrowers and there are complaints being made to the relevant bodies at present. I think the terms say if there are "exceptional circumstances" the banks can jack up their rates. The banks are saying that new regulation, new capital requirements, new more expensive rules put in place to protect consumers mean they are allowed to double the interest rates paid on these so called trackers which now seem anything but trackers.