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?

This

These are really extreme example of people have have got themselves into ridiculous situations and taken on far too much debt. They have been 'living the high life' backed up by the debt and now they will have to reduce their lifestyle expectations considerably. Those have been more sensible and are not over leveraged won't feel the pain as much. These people have actually been at a disadvantage in recent decades as taking of debt has led to more financial rewards than being careful and saving up.
The people I feel sorry for are the majority of mainly younger people who have been forced to take on a large quantity of debt to buy an ordinary home because successive governments have allowed house prices to become totally overinflated. It is these people who are struggling through no fault of their own in most cases.

I agree- if you are disciplined to save and put money away then its not an issue but if you arent, or cant, then I agree, its really stupid. We were on interest only for the first year of our mortgage then quickly realised we werent putting money away (because it was nicer to spend it) so switched to repayment because we recognised if we carried on like this, we'd be screwed in 20 years time.

A woman I worked with had an interest only mortgage and they both spent loads of money on ridiculously expensive kids presents, unnecesssary house stuff like £7000 venetian blinds for example, QVC crap weekly, booze, parties, designer bags, expensive cars etc etc so its not like they didnt have the funds to put away over the years- they just chose to spend it on frivolous stuff. Fast forward 20 years and their interest only mortgage is ending in 4 years time. They have no savings and are now bricking themselves about having to sell the house and having half its value. Its hard to be sympathetic because they knew this was going to happen, it wasnt some horrible surprise so I'm sorry but I have no sympathy for those kinds of people.

Low interest rates didn't result in people having more money in their pockets. Instead they were allowed to borrow more and consequently house prices have risen. Having experienced high interest rates and negative equity in the 1980s we were very reluctant to borrow all the money offered to us when we extended our current property. But if you didn't have a mortgage in the 1980s, and have always experienced low interest rates, you can see how people have assumed the rates would stay low. If the value of my property reduced by 75%, I'd still be quids in against what I've spent. However, I'll only benefit from the increased value if I choose to move back up north to a cheaper part of the country.

I was fortunate to buy my house when I was 19 and remember having interest only mortgages pushed upon me......I had the sense to turn them down as they seemed absolute madness to me and a recipe for debt. I feel sorry for the people in this situation but at the same time can't believe they haven't been chipping away at the capital for all those years. I mean if a not overly bright 19 year old could see them for what they were I don't see why they couldn't 😬

So I bought my first house in 2015 and moved to our current home in 2018. Both times we did actually take out the maximum borrowing we could but that was because I knew I would get a hefty pay rise so we would have additional breathing room. I never would have taken out the maximum if I thought our salaries would stagnate- at the end of the day, it doesn't matter if the house price goes up if you can't afford the mortgage to keep it!

We've also made sure our bills are not excessive- we don't have things like Sky, our mobiles are sim only and we don't have a car payment. We do have a credit card balance but enough in savings to pay off at any point.

I've always got a spreadsheet on the go of our budget so I can model for future changes. When we recently remortgaged I extended the term to drop the contractual payment, but we overpay as if it were on the original term. Just means if we have a heavy month, we can drop the mortgage payment to give ourselves some breathing room.

There will be people who have had a genuinely shit hand played to them and I have sympathy for them. I don't have any for people who purposefully over-leveraged themselves thinking the low rates were going to continue indefinitely. While the low rates certainly hung around for longer than intended, they were never going to be like that forever.

sellers are still in belief that there house are worthxxx
my son looked at a house a few weeks ago it was 325 he offered I think 310 they refused and wanted a min of 320
they had lots of viewings but no offers my son was the first one to make an offer
needed a bit of work on it but overall I would say it was a 8 out 10 in what he was looking for

so my son carried on looking and he found another house that was 325 and he offered 310
the sellers accepted there and then

estate agent for the other house rang my son yesterday and said the sellers of the first house would accept 310 and my son said no he has bought elsewhere

The house he is buying you could move in and not have to do anything to it
its a 3 bed so he won’t need to move in the future
And no chain and he’s not in a chain either
it probably a 9.5 out of 10 in terms of what he was looking.

he getting a mortgage @4.9 with Halifax
last September when applied for a mortgage it was 3.2

he’s been lucky that he has a massive deposit
his partner is buying with him but my son is ring fencing his deposit

I bet the first house people are kicking themselves now as they would have had a quick sell with my son

My IL did very well with their endowment mortgage.

I was always a bit dubious about interest only but then met a couple in city we then lived in they'd bough a wreck of a house and did interest only mortgage for 5 years and made it livable in that time - then switched to repayment they had a lovely Victorian house worth a heck of a lot more than they paid then had decade or so of low interest rates.

So it does depend on timing and situations.

I hate it when the media use stories like this because it distorts the issue

For every person who has made very poor financial decisions or based their life on exceptionally low interest rates so lived beyond their means, their are half a dozen others who have done all the 'right' things but still struggle

Very true.

To give an example...I recently touched my overdraft for the first time in 15 years and was in it for two days. As in, about £50 in to a £1000 allowance.

The bank immediately quartered my limit and sent me a shitty letter telling me they wouldn't give me that overdraft if I applied now but luckily for me they wouldn't remove it completely because they're so magnanimous even though I'm clearly an idiot spendthrift. That same week, they extended my credit card limit for about the tenth time since I got it, despite the fact that I've never, ever asked for an increase on that.

Now of course that doesn't mean I should spend madly on my new limit and I must take responsibility not to do that (indeed, I assume they extended it because I'm good at paying it off). Still, I think the financial behemoth has something of a duty not to push and encourage people to spend recklessly or unwisely. If they were so alarmed that I went £50 into my £1000 allowance, they shouldn't have given me that limit.

womoan 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.

She had to stop working due to a bowel condition, arthritis and fibromyalgia, so stuck.

@DrSbaitso I see what you are saying and agree with you to some extent but most people with these very expensive homes that the new interest rates have crippled are usually well educated types in professional jobs and should have known that low interest rates wouldn't be forever or that living right up to and beyond your means was a bad idea.

It's easy to judge, but people can end up in precarious situations and do what they can to survive- none of us can predict the future in terms of our health etc.

Not all mortgage holders stretched themselves and not all over 50's are sitting pretty. I had to move to interest only when my husband left me several years ago and I moved to the other end of the country to escape him - to a house that I had bought a few years previously and was renting out. I had to move into that house as I had no where else to go and move from a repayment mortgage to interest only because at the time I was working in a very low paid job - as it was the only one I could get in that area at that time. I don't have a massive mortgage, but even now, as I'm still single and having to pay for everything out of one salary, including debts that my husband had run up in my name, I still haven't been able to move to repayment again.
For me, it was a case of survival. I didn't have the credit rating to rent.

My mortgage term is up next year and I am choosing to re-mortgage and will go again for interest only because by the time that term ends, I'll be needing to either go into a care home or sheltered housing or I could even be dead. So it'll be sold.
It's not what I planned for my life, but it's what happened to me. Lots of people are in the same position, but our sad, pathetic lives do not make goady threads or frothing headlines in the press.

I agree totally well said, it is the youngest and the poorest who are really suffering here and who we should be directing our sympathy and any help at.

My DH and I bought our first house when interest rates were 17%! We have only moved twice since but we have been very wary of having too big a mortgage because of this first experience.
Like PP have said why should we subsidise those who were reckless when we have always endeavoured to live within our means?

it is the youngest and the poorest who are really suffering here and who we should be directing our sympathy and any help at.

Part of the problem is a weird cultural dimension which views such people as being authors of their own misfortune. If not on this thread, then certainly on these forums.

Re overpayments, NatWest allow 20% overpayments per year. We’re very fortunate and are on a low fixed rate with another 2 years to run with them so are currently weighing up whether to start overpaying or to put the overpayment money into savings and use that to clear a chunk of the mortgage when it comes up for renewal.

I meant the number of people who are in trouble paying their mortgages isn't unprecedented. It doesn't matter what the reasons are ,if you can't pay, then you can't pay and the end result will probably be repossession ,unless you can sell . I'm not diminishing the misery of what is happening now, I'm pointing out that many of the people I saw then had taken advice from 'experts' , thought they were OK and BOOM they weren't.

I thought is you had an interest only mortgage you had to have some evidence of savings to cover the cost of the property like an endowment? Although my parents had an endowment and it fell short like many peoples.

We have a repayment mortgage but we're absolutely bricking it with the interest rate rise. We're due to remortgage later this year and I simply don't know what we're going to do. We earn a good salary each but where we live housing is expensive. Our mortgage is currently £1500 a month and is likely going to go up to about £2200 (hopefully no more). We currently save around £500 a month so to pay it we'd lose that and the kids will need to stop all activities (swimming, piano, sports etc) and we'd stop the cleaner. We are fortunate that we have those 'cushions' available to us to stop. But a £700 is the max we'll be able to cope with.

One of my siblings has always had an interest only mortgage. I assume they’re planning on paying it off when they inherit from our parents or their in laws.

I bought a house 5 years ago. The language around mortgages was wrong. People would talk about what you could afford, what the call would lend you. The attitude was around how much the bank would lend, rather than how much is it sensible to borrow. Friends and estate agents spoke like this.

We were very conservative with our borrowing in case something like this happened. We felt like we were the only ones though, so perhaps we should get ridden the wage too. Over stretched, got a nicer place and then got help when it turned out to be silly

Errrr yes I know. But the US also has a lower tax regime and lower energy costs and even if you adjust for healthcare costs, I'd still be earning SIGNIFICANTLY more (and paying less) than I do here.

Errrr yes I know. But the US also has a lower tax regime and lower energy costs and even if you adjust for healthcare costs, I'd still be earning SIGNIFICANTLY more (and paying less) than I do here.

But you'd still be living in the US.

Savage 😂

Because you get all the equity as the prices rise and you’re paying a relatively small amount of rent to the bank instead of a larger amount to a landlord. You still have the security that comes from owning a house. I imagine it’s worked very well for many people but it doesn’t work anymore. Not sure why that’s so difficult to understand?