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to think that if you took out an interest only mortgage....

(195 Posts)
CherylWillBounceBack Wed 31-Oct-12 17:19:21

....that the clue to how the product worked was in the title.

To be clear I'm not attacking those who fell foul of endowment policies, but those who have either taken on more than they could have ever afforded as a repayment scheme, and even more at those that have released equity from these homes to fund a 'lifestyle'. It makes me absolutely irate as a saver who has seen people bidding up the property market to insane levels using borrowed money which it turns out they had no vehicle in place to pay back. They are now claiming they didn't understand what they had got themselves into.

They are not victims of anything other than greed and stupidity, and with the media coverage they've been getting over the last few weeks, it looks like we are now we are heading towards another bailout of the profligate, at the expense of those who saw this coming years ago and have seen their savings decimated due to inflation and low interest rates.

Disclaimer, I don't own a house, I stayed out and attempted to save up for one outright only to see the prices spiral out of control and then be propped up by all manner of schemes for those who have overstretched.

To quote Paul Daniels, if there's another bailout of either the banks or those who have been feckless, I'm leaving the country.

squoosh Wed 31-Oct-12 17:20:31

Well if it means we see the back of Paul Daniels . . . . .

kim147 Wed 31-Oct-12 17:21:33

Message withdrawn at poster's request.

CherylWillBounceBack Wed 31-Oct-12 17:24:20

Precisely Kim. It seems people are claiming that was too difficult to understand.

And Paul has been the performer's performer for years squoosh. How dare you :-)

FruitSaladIsNotPudding Wed 31-Oct-12 17:24:25

Of course they understood. They just don't want to take responsibility because it hasn't worked out as they planned.

CherylWillBounceBack Wed 31-Oct-12 17:25:45

Again Fruit, precisely my point. Screaming about mis-selling in these cases seems like complete hogwash.

ajandjjmum Wed 31-Oct-12 17:28:29

We're sadly old enough to have taken out an endowment mortgage, which matured at around £25,000 less that it was supposed to. We thought we were very sensible!!

Xales Wed 31-Oct-12 17:30:48

I don't believe them.

They started off with a repayment mortgage so they knew they were repaying the capital.

They then switched to other sorts of mortgages so in my opinion knew the difference and clearly did it for the £££. That they used this for care fees rather than the house is sad but does not alter that they did it.

They would also have had some kind of statement every year saying how much they had repaid in interest and how much was still outstanding.

Endowment policies are a different evil however even with them you get performance and predictions every year so know if there is going to be a short fall.

LunaticFringe Wed 31-Oct-12 17:31:36

Message withdrawn at poster's request.

Loshad Wed 31-Oct-12 17:32:43

agree totally, even the ones who claim surprise when their repayment vehicle doesn't make the mark, they will have had yearly letters for at least the past 10 years telling them that, with the relevant bits marked in red so you can't miss them.

Dawndonna Wed 31-Oct-12 17:33:59

Moved to repayment around ten years ago. It was obvious it wasn't going to work out.

ajandjjmum Wed 31-Oct-12 17:34:48

We obviously made other arrangements too - but that doesn't stop the irritation of something not performing to the level that you'd been promised.

Crikeyblimey Wed 31-Oct-12 17:35:02

My very first mortgage was an endowment mortgage. I remember asking the advisor if he really meant that I would not only be able to pay back the capital but have some spare money at the end of it. He categorically said "yes you will". Well guess what? No I didn't!!

Fortunately for me, I realised long before it was too late and switched to a repayment mortgage.

I WAS mis-sold. This was over 20 years ago. I am not alone. I'm not claiming anything though cos I fixed it amd it was so long ago I don't have any paperwork or proof of what the prat told a 22 year old.

Loshad Wed 31-Oct-12 17:35:14

but aandj, you have had many letters over the years telling you that, we have one maturing next year that was supposed to (according the seller shock) make us £48 000, it will mature at around £36 000. We have known for at least 13 years it would not make value, and so switched to repayment.

AnnoyingOrange Wed 31-Oct-12 17:35:20

I had an endowment mortage and in latter years were bombarded with letters about the shortfall and the fact I'd need to set aside more to pay it off.

I fail to see how someone could not realise this with all the publicity, letters from the endowment etc etc

TheCrackFox Wed 31-Oct-12 17:35:24

Our first mortgage was an Endowment, but we were warned that it was underperforming so we remortgaged to a repayment one.

The reason house prices are insane is because of insane lending. I know people with 100% interest only mortgages who are now in negative equity. Now the bank shouldn't have been so irresponsible to lend the money but similarly people shouldn't have been so stupid as to borrow the money.

CherylWillBounceBack Wed 31-Oct-12 17:35:32

Sorry to hear that ajandjjmum. A good example for the parasitical financial services industry preying on people with products that overcomplicated (what should be) simple arrangements.

However, in recent years since the endowment scandal took place, there is simply no excuse. People complaining that the banks didn't check that they had a vehicle to pay back, when we all know that both them (and maybe the banks - though I'm inclined to believe they knew exactly what would happen eventually) assumed that property prices would rise forever and downsizing would pay off the principal was their plan have no reason to complain.

financialwizard Wed 31-Oct-12 17:36:39

That is the trouble though LunaticFringe not many people do read the paperwork. Many many people rely on the words spoken by the advisor and do not read the small print. Very dangerous thing to do in finance.

I used to work as a mortgage underwriter (up until my fifth redundancy in 2008) and the amount of times I had to spell out certain areas of the small print to clients was scarey. Either they did not read it at all or they completely disregarded something fundamental.

When I first took a mortgage out I had no idea what I was doing (was 21). I was sold an interest only mortgage with an endowment. Thankfully I sold that property in 2001 and when I moved took out a repayment mortgage. It is only now that I realise how poor that advice was, even then.

FunBagFreddie Wed 31-Oct-12 17:36:54

Another bailout? Seriously?

JakeBullet Wed 31-Oct-12 17:37:59

I had an endowment mortgage for a while but it was pushed and pushed at me. I really anted a repayment mortgage and in the end the sales bloke just wore me down. I switched to repayment when we moved house and kept the endowment going for a while until I started getting letters telling me there was going t be a cashed it in at that point, it paid for central heating in our new place.

kim147 Wed 31-Oct-12 17:38:15

Message withdrawn at poster's request.

CherylWillBounceBack Wed 31-Oct-12 17:40:09

I'm not ruling it out Freddie. There's been a lot of media chatter about this over the last few weeks. If it happens that it turns into a 'mis-selling' scandal, this one could be very costly. And it the banks are deemed to be on the hook for it....they'll put another gun to the head of the government in order to get the money to pay for it.

gindrinker Wed 31-Oct-12 17:41:56

I know an appparently well educated woman who took out a 100% interest only mortgage, who was shocked when she tried to sell up that she hadn't enough for the deposit for the next house.
Did she not look at the yearly statements? Read the paperwork when she took the blasted thing out or understand it?
It's a fuck load of money you're borrowing, I wanted to understand everything.

Whoknowswhocares Wed 31-Oct-12 17:42:04

Well if you can't be bothered to read the paperwork telling you there will be a shortfall then you have no one to blame but yourself!

CherylWillBounceBack Wed 31-Oct-12 17:43:32

Good to see that the general response is one that there has to be personal responsibility for this one - phew!

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