People with Interest Only Mortgages

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http://www.bbc.co.uk/news/business-34144333

I'm really struggling to see why the banks should try and help these people out as the idea of an interest only mortgage is stupidly simple and I can't fathom how anyone can feel like they have been duped into one.

My parents had an endowment mortgage and it was all paid off at the correct time and they always knew that there could be a few outcomes. You get the house paid off, you get the house paid off and end up with some extra or the policy falls short and you have to make up the difference.

I never spoke to them about this really because why would I care but I knew what an interest only mortgage was from quite a young age because i'm not retarded and it does what it says on the tin.

The tone of the governments views on this makes me think that ultimately they will step in and force the banks to help these people that didn't bother to make any plans to pay off the actual value of their property if they claim they didn't realise thats what they had to do.

Am I being a cold hearted bar steward or do people that have interest only mortgages deserve help.
 
Nearly a million homeowners have no way of paying off their mortgages because they opted for interest-only loans, according to Citizens Advice.
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No way???.......Selling up and downsizing is an option
 
Aren't a lot of Buy-To-Let-ers on interest only mortgages? They'll get no sympathy from me, but then they don't need any since they've made a ton of dosh out of other people's misery and by doing sod all.
 
Sarah, who lives near Brighton and has an interest-only mortgage, said she and her husband could hardly afford the interest when they bought their house and frequently fell into arrears.

"We were silly. We'd just had our first baby," she said.

"But they shouldn't have given the loan. We didn't understand what we were taking on and didn't think about having to pay it back."
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Tough ****, people need to have some responsibility for their own actions, it's not the banks fault you didn't know what you were doing and wanted to buy something you couldn't afford.

Zero sympathy from me
 
I'm struggling to see the issue, on the basis that the property value has most likely risen. Sell it, pay off the mortgage, move on.

They were never going to pay off the mortgage and keep the house, so why act like that was ever a possibility?
 
scorza said:
Aren't a lot of Buy-To-Let-ers on interest only mortgages? They'll get no sympathy from me, but then they don't need any since they've made a ton of dosh out of other people's misery and by doing sod all.
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Oh yes the god given right to be able to buy a property in an area you can't afford to live in.

Some people don't want to have a mortgage and are happy to rent.
 
No sympathy here.

"We didn't understand what we were taking on"

So why exactly do you think mortgage X was significantly cheaper than mortgage Y, and what exactly do you think the words "interest only" actually mean?
 
This is why finance management (and cooking tbh) should be taught in schools over useless academic subjects. These are both life skills that everyone should have.
 
Haggisman said:
No sympathy here.

"We didn't understand what we were taking on"

So why exactly do you think mortgage X was significantly cheaper than mortgage Y, and what exactly do you think the words "interest only" actually mean?
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I can only assume that they went to a broker and said "We'd like to buy a really big house, but we can't afford to spend much on the mortgage."

And then just waved through everything without asking about any of the details, whilst the broker picked up a nice commission. But I can't really sympathise with people taking on hundreds of thousands of pounds of debt and not bothering to go through the detail.
 
Sarah, from Brighton, is either lying or just plain stupid.

At some point someone will have informed them or somewhere on the application it would have said you need (or do you have?) a means to pay off the capital.

Not everyone on interest only will be able to downsize come repayment time if their equity stake doesn't buy them another property - particularly if they are now older and can't get mortgages or no longer have income to cover a new mortgage.

I've got an interest only mortgage on my first house but fortunately it's quite low. Banks were very lax at the time. Some asked the question but never really paid attention to the answer regarding paying off the capital.
 
mattyg said:
Oh yes the god given right to be able to buy a property in an area you can't afford to live in.

Some people don't want to have a mortgage and are happy to rent.
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If people can afford to rent then they can afford to live there. Only reason they can't afford to buy is that house prices have been driven up so much in part by BTLers and saving enough for a deposit takes so long because rents are sky-high.
 
No sympathy from me either.

Average mortgage is what? 25-30 years, the assumption is there that during the length of the mortgage you'll put money aside or you'll increase your earning potential to make sure you can pay off the capital when the time comes. If you can't fathom that out at the point of applying for the mortgage to the 30 years inbetween, you shouldn't even be buying groceries, nevermind buying houses.

It's just idiocy, and I agree with above that financial lessons should be given at school level.
 
I'm sorry but this isn't quadratic equations. You could explain an interest only mortgage in 2 minutes to a 10 year old.
 
Thing is it shoudlnt really be an issue

Take the inlaws. They had a 25 year £80k mortage. When interest rates were 16%.

They could barely afford the £1000 a month. Roll on 25 years and they were both earning £50k per annum and their mortgage was only £266 a month.

So if these people havent increased their mortgage payments or saved up the money and have spent it elsewhere, i have no sympathy.

Surely their mortgages will be only a fraction of what the house is worth and what their incomes are now and they can just re mortgage onto a repayment one?
 
I don't see the issue, some people rent all their lives anyway...

Essentially these people have had a cheaper option than renting without actually stumping up the extra cash to pay for the house in full. They can remortgage and try to pay for the capital portion too or they can sell up to pay their debt and perhaps downsize, or they can sell up and move to rented accommodation. There is also that lifetime mortgage option... presumably the price must have gone up a bit to leave a decent amount of equity for that to be worthwhile to the bank.
 
scorza said:
If people can afford to rent then they can afford to live there. Only reason they can't afford to buy is that house prices have been driven up so much in part by BTLers and saving enough for a deposit takes so long because rents are sky-high.
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No. When you buy a house you are also liable for wear and tear and repairs etc.
Its not as simple as that.

As for if they can rent then can afford to buy. There was a house near me up for sale at 1.2 million or £2k per month rent. I'd rather rent @2k that mortgage at £4k +

I know a couple of families that don't want to be saddled with a mortgage.

We have an obsession with having to own our home in this country.

When I was 18 I rented a flat for £30 per week there is no way I could have afforded to buy it even if it were £30k
 
It also wants greater protection for interest-only borrowers, to force the lenders to consider a range of alternatives before trying to repossess a home.
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Not sure I agree that further change is needed here - that sort of thing just increases the risk to the banks which we should have learned by now isn't a good thing.
 
Almost all of this is down to the buyer who should have enough sense to know borrowed money needs to be paid back - although I do think banks should be more stricter in their checking of how mortgages will be paid back. At the moment I'm on an interst only mortgage but it was always our intention to switch to repayment - unfortunately the financial situation changed significantly and we're selling our house which will cover off the mortgage without any problems.
 
My mortgage company writes to me every year to remind me to have something in place to repay the interest only part of our mortgage in 8 years time.
 
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