To worry about lots of poor pensioners that have been miss sold interest only mortgages

[breakfastmeansbreakfast]

www.theguardian.com/money/2018/jul/16/im-65-and-my-interest-only-mortgage-is-ending-what-can-i-do

Not much sympathy on the guardian comments unfortunately. But shouldn't it be upo to the bank to make sure a repayment plan is in place for interest only? I worry there are going to be lots in the same situation

Was it mis-sold? The letter doesn’t suggest that it was. More that the person taking out the mortgage took a gamble on not being in this situation and it hasn’t paid off.

Whether they were hoping to inherit money/win the lottery/die before the balance was due I don’t know but they didn’t have a plan and now they’re stuck. I’m not hugely sympathetic tbh.

Why should the bank be responsible in setting up the vehicle for people to pay back their loans? Borrowers are fully functioning adults.

It’s always been very clear when taking out interest only mortgages that the customer is responsible for ensuring they have suitable finances in place to repay the loan at the term end. While I sympathise with people who are unable to repay their loans, it is not the lender’s fault.

Its called an interest-only mortgage for a reason, so I don't have any sympathy for someone who apparently didn't pay much mind to what was going to happen at the end of the deal.

No, it's not the lender's responsibility. People on IO mortgages are frequently reminded that they are IO and that they will have to repay the balance at the end of the term. They have had years to sort out a repayment vehicle.

They weren't pensioners when they took out those mortgages and have had years to arrange a repayment vehicle, as well as multiple reminders from the bank.

Borrowers are fully functioning adults

Well you'd think, but there doesn't seem to be a shortage of people who claim that they didn't understand what the words 'interest only' meant, despite them signing paperwork that would have included a reference to 'the repayments are for the interest only, separate arrangements will need to be made by the borrower to repay the capital' or words to that effect, plus a numerical illustration.

Eg 300 payments of £200 pm interest plus a final payment after 25 years of £50k, or whatever. APR X%.

Banks have fucked up a lot over the years (endowments, PPI, packaged bank accounts, lowering monthly credit card payments so the minimum payment doesn't cover the interest so people don't realise there is a problem until they are tens of thousands in debt), but with IO mortgages, the majority of borrowers really have to take a hard look at their own level of personal responsibility on this one.

No sympathy from me eitherz

How is this the bank's responsibility?!

Banks missell on some products but there's also personal responsibility here.

There is a reason interest only mortgages are so cheap.. do people really expect to have not actually paid back the capital then expect sympathy for ignoring the obligation until retirement?

There's often Sad Faces in the financial papers of people claiming they didn't understand what they'd signed, despite all the stuff they banks gave them and portraying the banks as the baddies.

I had a IO for a few years in the 80s and even then there was lots of stress on how I'd need to fund the payback 25 years on.

I agree with PPs, borrowers have to take personal responsibility for their debts. The banks/building societies have been warning borrowers for years that they should have a plan in place to cler the debt.

I have a friend who’s my age (middle 30’s) who has a 500k interest only mortgage! All because the ‘repayments’ we’re cheaper. She’s in compete and utter denial on how she’s going to pay it off! She has absolutely no idea. I know I have a big mortgage but at least in 20 years time I will own my house and have no massive lump sum to find.

I have little sympathy to be fair. Arrangement should have been put in place when the mortgage was taken out.

Isn't the problem that people are used to simply taking out another interest-only mortgage when their current one comes to an end, and then suddenly find out that they can't do this because of their age (even though they have the income to support it)?

We are also used to house prices rising, but in many parts of the country they haven't done so - if their house is worth £190k, they are almost certainly in one of these areas, where prices may not yet have regained pre-2008 levels.

As the article makes clear, relaxation of FCA rules means that a few companies are now offering mortgages to older people.

My first mortgage was interest only. The bank couldn’t have been clearer that I’d have to pay off the capital at the end. The building society I had my endowment policy with couldn’t have been clearer. I had letters every year about the maturation value of the policy and when it seemed likely that it wouldn’t actually be enough (only 5 years in) I had numerous letters warning me of this. I sold the property and my next mortgage was a repayment one.
So no sympathy here. It’s crystal clear. From the outset. With plenty of warning if it seems like you won’t be able to cover it with endowment or insurance.

do people really expect to have not actually paid back the capital then expect sympathy for ignoring the obligation until retirement? ... though the person in the article hasn't actually retired yet - they're still getting £23k a year on top of their £15k state and occupational pensions, so are quite able to continue servicing a mortgage.

I also think people need to take responsibility for this. Most have the interest only because its much cheaper than repayment and interest. The amount of people that told me to switch to interest only when my ex left was a lot. They couldn't understand why I'd rather struggle for a bit and carry on paying my mortgage than be left with a huge lump sum to pay at the end.

Most said 'well you can sell your house at the end and pay it off and buy somewhere smaller'???? I live in a small 3 bed bungalow which is perfect for my old age. People are stupid and don't think about the long game.

If you are responsible enough to take on a large debt, it is your responsibility to make sure you understand how it's going to work, and how you are going to pay it back. Short of some sort of obligatory competence test prior to taking out a mortgage, I dont really see wh at else lenders can do. It says "interest only" right there on the tin!

I also have limited sympathy. Unlike misspelling of PPI, where people forked out more than they should every month, somebody in this situation has been lower amounts than they needed every month, potentially for two decades or more. They've had the benefit of the situation for a long time. Suddenly deciding now that it wasn't wise- well, tough luck.

Our first mortgage was an endowment which has performed dreadfully. We have had dozens of letters reminding us of this. A portion of our existing mortgage is interest only and yes, we’ve had that pointed out, too.

It’s a shame if anyone has to sell when they don’t want to but most will have substantial equity and nobody gets let off because they didn’t like thinking about the future.

Please don’t have sympathy they knew what they were doing and in many cases used the money not spent on repaying the mortgage for their lifestyle, ie holidays, etc.
I say this as someone with an interest only mortgage.

So that's unanimous - no one feels sorry for them.

If that article is the one I remember, the person wasn't being pathetic or complaining, they were simply asking if there were any options.

I see no reason why you shouldn't be able to continue paying interest-only until you die, at which point your house gets sold to pay back the lender.

I think the advice they got is that they might be able to get a loan from a specialist lender?

We have an IO mort, at the time of take out we had to prove we will have the means to pay it back. We secured it against our pension & pay a significant amount per month into our pension to fund it.
It works for us.

IO isn't always a terrible idea even if you cant pay back the capital at the end. Just turns it into a more secure form of renting, and can often be cheaper than private rental. So people do actually go into it with eyes wide open.

YABU to describe it as mis-selling.

I don't think you're wrong to worry though. This is going to become more common in the next decade or so. Could have a significant impact on the rest of us, who knows?