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

[CherylWillBounceBack]

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

www.dailymail.co.uk/money/mortgageshome/article-2225427/Over-50s-mortgage-trap-cost-home.html

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.

Talkin I'm on a repayment mortgage so can't take you up on your offer. Closest I've got is a 15 year savings plan thing that is up soon :)

..and me. Until saving/living within your means/not being a mindless consumer is rewarded, the situation will keep getting more and more serious. The government (whichever is in) can try and massage the figures all they want, but it's a house of cards.

Every time it is about to fall the govt of the day fix it. The low interest rates and QE are a bailout by any other name.

Too right, noddy.

Favouring debtors and others who've made foolish financial decisions while sticking it to the rest of us who lived within our means and didn't take on debt or mortgages for homes we can't truly afford.

We have had our mortgage for about 4.5 years. We had a 100% loan on repayment. DH & I at the time came under bad risk I suppose so our interest rate was higher than average when we started. Then we fixed in after the initial two years, at a slightly lower rate more in line with the market.

When interest rates crashed it was so tempting to go variable/interest only BUT a) repayment on a fixed interest suits us. It means our payment can't change randomly and b) our house has held it's value, so we have been paying money off the house.

So yeah, in a way we may be paying a little over the odds but it works for us and it feels secure. I'd worry way too much if it was just interest only.

Repayment isn't paying over the odds it is clearing your debt.

ok, i understand the bit about being mis sold a mortgage and you 'didnt understand' that interest only meant interest only or hat your pension/endowment wouldn't acheive the capital needed. So i do fully understand that you could feel aggreived by this.

My dad was sold a pension linked mortgage, but hes known for years that it wouldnt pay off his mortgage and moved to a repayment mortgage and taken out an extra pension to cover his retirement. (hes now paid his mortgage off this year but still not at retirment age)

The person i find most shocking and to be frank an idiot in the dm article is the man with the million ppound house sat empty while on top of his mortgage, he is lso paying or rent on another property that he lives in? Why not live in the property with the mortgage and move to rented once you've sold? No wonder hes in financial trouble if he thinks this answers his problems. (unless ive missed something obvious)

We got our mortgage 3 years ago, on a fixed rate, but a very low one, and it's gone onto variable rate now. However, we are currently overpaying it in a bid to pay it off quicker, while the interest rates are so favourable, as well as putting money aside in case interest rates skyrocket and we need a bit of a buffer to soften the blow. Saying that, we bought a cheap house with a big-ish deposit, and we were very lucky. The mortgage company were willing to lend us a HUGE amount more than we borrowed, but were not very keen on telling us how much our monthly repayments would be. I imagine it would not be too difficult for people to end up borrowing FAR more than they can really afford to repay each month, without much thought as to what happens when interest rates go up. I knew nothing about mortgages before buying, and probably could have been talked into borrowing more, I'm just lucky and have a financially responsible husband.

I'm more worries about some of these 'partial ownership' schemes that some of friends are getting into. Seems like a total scam to me. You're paying rent and a mortgage, and sometimes also a loan to cover the deposit? But they're so desperate to have a home of their own that they're doing it anyway. It's scary.

You are definitely not being unreasonable. I could rant about this forever.

I do think this comes from the way people are brought up. I was brought up (I believe) with a very healthy attitude to money: be careful with it, but it is not the be-all and end-all. Dh's family are very money grabbing, materialistic and greedy. They were brought up this way and now dh's parents are paying the brunt of it as their own children refuse to help them out (they live in a third world country).

Part of me feels like saying: serves you right. You taught your children to value money above all else and now they value it above you and your needs. But mostly I feel sorry for them and encourage dh to help because sacrificing some bathroom tiles is not as important as good hospital treatment.

I do get very tired of hearing people in various situations complaining that their adult children will lose their inheritance. Being able to hand on something to your children is not a right, it is something you get to do if you are lucky/prudent/organised.

I remember an excruciating meeting with my bank manager and a woman from the bank's mortgage division in which she tried to talk me into going with an interest only mortgage plus endowment policy while he squirmed with embarrassment. Cue his great relief when I rejected the idea out of hand and he could join in the debate about the sensible option of capital and interest repayment. They were clearly a very bad idea even if the endowment were with an absolutely stellar investment fund, let alone a high street bank with a very patchy record, but they were very hard sold at one time. I found it very interesting that one of the bank's own managers was so obviously uncomfortable with them being peddled.

But if you took one out, and then stuck with it for decades in the teeth of all the evidence of shortfall and advice to switch, it is your own tough luck. I don't think any kind of publicly funded bailout is merited. You can't be constantly protecting people from every consequence of their own stupidity.

Noddy I think Golden meant that she is paying over the odds in interest, due to her fixed rate.

Thanks Noddy that was what I meant. Our interest rate is fairly higher but it's also because of our past credit history so just glad we got a mortgage in the first place. Couple of years time we can move it and get a better deal I suppose.

Good grief! We switched to interest only in tough times as it was cheaper than selling and moving to rented accomodation knowing full-well that it was a last ditch attempt to hold onto our property until we could renegotiate a repayment mortgage.

If push came to shove we knew we'd have to sell and move on. But how deluded do you have to be to think otherwise. Are there fairies at the bottom of your garden?

damn sorry, thanks Bogey

This is why the government is doing everything it can to keep house prices ludicrously high. To save all these feckless idiots who overspent instead of investing wisely and keeping up to date on their financial obligations. All these millions of people who bought properties they could not afford and now need the younger generation to bail them out or pay for their overpriced houses which they assumed would be their pension. FFS!

ophelia
because if they pushed up the interest rates to shake out the unaffordable mortgages, the cascade of house repurchases, family breakdown, job losses and benefits claims would bankrupt the country PDQ

And the house builders will not build on the 400,000 plots that they both own and permission for (ie could start laying bricks this week) because if they did their profit margins would collapse - and they all pay fees to former ministers

and if everybody DID default on their mortgages, the banks would go bust, taking our savings with them.

Basically we have to go through what Japan has had - 20 years of house price stagnation eventually bringing prices back into line.

I have a client still paying his arrears from a house that was reposessed in 1993 after all ....

YANBU at all.....no sympathies for these "victims" who seem to expect the moon on a stick

YANBU. I am very, very glad we got a repayment mortgage, even though the payments are higher.

BreconBeBuggeredWed 31-Oct-12 23:20:54

Oooh, now, can I look forward to someone coming around to my way of thinking and compensating us for fixing our mortgage interest rate for TEN FUCKING YEARS? We need restitution for month after month of anguish as rates fell through the floor and we were left paying squillions while less prudent types quaffed champagne and bought new kitchens with all that spare cash. No? Well, fuck it then, no, I don't want to bail out people who are too lazy to read the small print.

We also fixed ours for 10 years....we are on Standard Variable Rate atm which is a lot lower!! We write it off and see it as a risk premium/insurance for the certainty of monthly payments.....so should we also whinge to the Daily Fail and demand some sort of compensation/bail out for our decisions? [hhmm]

We technically have an interest only mortgage (offset mortgage, that's just how it comes, but we make payments as if it were a repayment type mortgage) and in our application we had to explicitly confirm that we had a repayment vehicle in place - even though in our case it was just paying off the capital in overpayments.

The only way to get it otherwise would have been to lie on our application.

Is this not common/normal?

I know someone who remortgaged 7 yes 7 times to put kids through private school. House has now dropped considerably and neither of the kids (twins) wants to go to uni they are distraught! Those days are over!

Talkinpeace...I have been wondering about this...I remember the early 90s and 15% Interest rates.
If that happened again then no one would be able to pay would they?
The banks would go bust?
Out first mortgage was 2.5 x Dhs salary.
Our current one is 3 x salary.
So we have never been people to take risks and we too have had fixed rates for the last few years of lowest ever interest rates :(
You just have to accept you made a mistake and get on with it.
You make the decision that seems the best one at the time.
I kept saying "this can't last, this can't last" but in fact the boom lasted far longer than I thought it ever would.

badvoc
I took out my first mortgage in 1987.
Yup, I remember 15%
I also remember ten years of 5%
TEN TIMES what they are now.
Admittedly the margin the banks take would drop but a £200k mortgage for somebody on an old 2.5% deal IO would rise from £415 to £1000 and to £2100 if they were to go repayment .....

technically my mortgage is 5 times my salary (self cert) - but I know what I'm doing about it.
Many of my friends do not.

my mortgage :earned income ratio has hit 14*

it still got paid

currently sitting at *5

still getting paid.

it's whether the monthly repayments are within possibility that is key, not the total amount outstanding. people wed to the 3* ratio as though it were hewn on the decalogue ignore that the average household budget allows additional housing spend as food costs less than it did (as a percentage of household budget)