Mad mortgage sob stories – what am I missing?

[amluuui]

I've seen a couple of slightly mad stories in the paper in the last few days, of people who have owned their homes for decades, yet have been on interest-only details. And now they're suddenly panicking about interest rates.

Like this bloke, who seems to have owned his house for over 20 years, remortgaged to pay for improvements and still has nearly half a million left to pay off.

He says: "We’ve geared our lives around the low interest rates of the past 13 years. I am the only earner in the family. If interest rates hit 6%, I’ll have to find an extra £1,480 per month – well over double what we pay now. That is totally catastrophic for our family, absolutely terrifying.”

Can anyone explain why on earth he thought this was a good idea? What would his rationale have been for doing this? (As a renter who is trying to save to buy, hell no I don't want to bail him out.)

Another woman here, who's owned her home for several decades and is on an interest-only mortgage. Why? It does seem she's had health problems, which is rubbish for her, but how was she planning to eventually pay off the mortgage?

Am still getting my head around mortgages and genuinely want to understand this, if anyone can help. I thought only landlords got interest-only deals?

A friend of ours is on an interest only deal and has been for many years, not sure how they got it but it seems to be a long term thing.

Just as well as one of them had to quit work due to ill health. Rent is insanely expensive here and probably 4x what they're paying for the mortgage.

Why should schools bear the brunt of educating life skills? Surely it's the parents who should be doing this. And if the parents are incapable, maybe it could replace a useless subject at GCSE? When I hear of some of the ridiculous subjects kids are able to do at GCSE my heart bleeds for their future. Photography/Textiles/Food Tech - wtaf. Fine in FE but not at school.

Anyhow - people struggling to pay their mortgages at the low rate of 5% interest have absolutely no sympathy from me and shouldn't get any government support. They should definitely be allowed some leeway from the banks however as long as I don't have to pay for it. Stupid is as stupid does.

It's insanity. I find it so frustrating.
We had a 125% mortgage from Northern Rock when we bought our first home. I was 6 months pregnant. We remortgaged onto repayment asap and have put every spare penny we have against it in fear of something like this happening. We have mot had renovations, cars, holidays etc. Why are we all expected to feel sorry for people with decent incomes and horrendous decision making ability.

My DB earns 5x what I earn but owes over £1M on his mortgage because he has used the rising house prices to fund a mega lifestyle, when he could have had a rich life on his wage and paid the mortgage off. He is asking me to borrow now - it's absurd - his household income is 7x ours! No! You'll have to sell your 4 cars, your holiday home etc. It's madness.

This. We did the same thing. There was no limit on over payment which allowed us to throw money at it when times were good.

i don't believe these are real people with real stories. we're being steered into shrugging our shoulders and saying it's your own fault by the media

I think it's 10% of the whole mortgage, not 10% of your payments, iyswim. But happy to be corrected?

That's the point though, they won't need such large mortgages.

We bought a reposession in 1992. It wasn't registered land so the deeds included details of all the previous charges on the property.

We paid less than 2/3 of the value of the mortgage that had been taken on it 3 years previously.

An equivalent today would be a £340k house (approx what that house is "worth" now) reducing to £210k. It was certainly a help to us as first time buyers, even though interest rates were high. We'd have never been able to pay the higher price.

Also for context, that house cost 10x what I was earning in an entry level job in a bank. So £210k makes much more sense than £340k.

Somebody someone will insure you, it’s just a case of for how much but everybody is insurable.

I’ve had a life insurance for the last 10 years. It’s the best £40 month I spend. Anything happens to me. The mortgage is paid off and the children have a lump sum. They are not relying on the property for their inheritance.

I believe they are real people just not typical people. They make a good article

We took out an interest only mortgage but asked the lender to factor in capital repayments over the 20 years and we overpaid that amount monthly on top of interest.
In effect had we wanted to we could have reverted to interest only in an emergency but fortunately never had to.

MN is not representative but if you look at the threads on here pre rate rises the advice was always to upsize... 'stretch yourself' etc. Also nothing less than a detached will do (although a semi is a massive step up from a terrace, let alone a flat!'

I can see why people get into this situation.

Look at this another way. The mortgage bomb is a huge political story. The media want to feed the huge story with case studies. They are looking for people who can illustrate why a rates rise will be devastating and in doing so have found some extreme cases.

Christ, there's a lot of smug cuntery on this thread, but this takes the biscuit!

No empathy with people who may have faced absolutely dreadful life issues oh no. They are 'entitled".

Endowment policies to pay off mortgages were OK when few people had them as there was plenty of money being earned to clear the debt. Unfortunately people then thought that just paying the interest was OK because before the term expired they would sell at a tidy profit and downsize. That works if house prices increase but sadly some have found the increase to be too small to enable a decent sized property to be purchased. Interest only mortgages were also cheaper at one point compared to repayment mortgages and, again, some didn't think that there is a reason for that. And, yes, if you have a mortgage you need some sort of insurance to clear the mortgage should the worst happen.

I will add that I have huge, vast sympathy for anyone who is a first time buyer trying to enter the market today

But if they don’t need such large mortgages then other people won’t need such large mortgages either. So they’re at no advantage compared to other buyers, and can get priced out by them again.

It's not just mortgage rates though is it.

My energy bill has gone from £130 in March 2020 (when we moved into our property) to £300.

My grocery bill is around an extra £200 a month.

Council tax, water, phone and broadband all up. Clothing and shoes for my growing children are up.

Swimming lessons, childcare fees all up around 20%.

My public sector wages have risen by £130 a month.

I have an interest only mortgage. I'll be paying it off next year. Apart from this last couple of years the interest rates have been so low its been great. We were saving the amount and with an inheritance and a small chunk of dhs pension we should be fine to clear it. Bought the house for 187k and now worth 850.

I don’t. They’re in an enviable position. Keep stashing the money away at ever rising interest rates, grow their deposit, wait for the inevitable fall in house prices to hit the bottom and buy with a much higher LTV. If they’re wise they’ll wait and cash in.

They will, however, need larger deposit, at some point during the pandemic, they pulled everything except 85% mortgages. If the banks get the EB Jeebies again. First time buyers will not be snapping up any bargains.

Exactly. People were encouraged to “stretch themselves” and made to feel foolish for being cautious. However, I absolutely do not think that these people should be bailed out by those who took a more cautious approach and were sensible, ignoring the ludicrous suggestions that high leveraging was a sensible move. High borrowing was always going to be a risk which some were happy to take in the quest to make easy money from property price increases. Interest rates only ever had one way to go, and it certainly wasn’t down.

We were the same could be really flexible with it but most of the time threw every bit of extra we had into it. And treated it like a repayment mortgage that we had full control over but like I said up thread we had to be really disciplined.

Quite

My ds works for a bank and is dealing with these customers every day.
He’s amazed at the amount of people over 50 who are completely shocked that they have a few months in some cases to pay back capital of £120k or more and think that they should just be allowed to carry on as before.
They will not contemplate selling their family home even if the dc are adults.

Do people really think that a mortgage period of 20 years is a loosely binding contract that they can ignore?
My mind boggles at the stupidity. Interest rates have been so low that even small capital repayments would have made quite a big difference if made regularly over the term.

No but people who've already paid the higher prices already have the higher mortgages. They'll be forced to sell for whatever price they can get and the market will be flooded with cheap properties, reducing prices even further.

It won't be a gentle reduction. If it happens it will be an almighty crash. As I said up thread, people were just handing keys back to the bank last time because you couldn't sell at a price that would clear the mortgage. It was a truly awful time after a period of boom.

Its not that long ago, certainly within living memory but no lessons seem to have been learned.