Times up, Zero interest mortgage.

Freddie1980 · 24 Jul 2017 at 13:14

MadMossy said:
Chances of another big crash before the end of the decade. Pretty likely I reckon.

A good chance IMO, not only have you got the issue of IO mortgages but also Help to Buy loan equity scheme's where the government has helped first time buyers by buying the first 20% of the equity which has doesn't have to be paid back until 5 years after purchase. All this has done is inflated new home prices and left a significant number of people on a ticking time bomb of debt that has to be paid off very shortly.

Has anyone seen that George Clooney movie Perfect Storm?

robj20 · 24 Jul 2017 at 13:42

dowie said:
banks will repossess - why on earth should people get handouts for this?

They shouldn't but you see it time and time again, idiots that don't read small print and just sign get bailed out.

The government will force the banks to accept payment plans or something like that where they can pay back monthly over a few years. Maybe even an interest free mortgage.

dalehitchy1 · 24 Jul 2017 at 13:56

I hope they don't. I'm completely new to mortgaged having only bought this year. I had the option of a normal mortgage or interest only.

I class myself of average intelligence and even I know that the end of an interest only mortgage you have to pay the whole mortgage amount at the end of the term.

These types of mortgages benefit people who want lower monthly payments so they can save the capital more quickly to pay it off at the end. Alternatively.... It gives people somewhere to live very cheaply and allows people's house to grow in value so they get a hefty profit at the end.

It would be so unfair for the government to intervene here. These people would have had 25 years of lower mortgage payments... A massive rise in their house value and then get some sort of state intervention. All at the fault of extremely poor planning

dowie · 24 Jul 2017 at 14:05

yeah you're right it would be a shame to see them cracked down upon simply because some people have been feckless

interest only mortgages could be useful for people who have rather variable pay - they can keep month to month costs low but then pay off big chunks of the capital at a time (or put large lump sums towards their savings/investments set aside to pay it off at the end of the term) each time they get a large bonus or perhaps land a new project/deal (if they're self employed etc..)

Jamesyboyjim · 24 Jul 2017 at 14:28

dalehitchy1 said:
I hope they don't. I'm completely new to mortgaged having only bought this year. I had the option of a normal mortgage or interest only.

I class myself of average intelligence and even I know that the end of an interest only mortgage you have to pay the whole mortgage amount at the end of the term.

These types of mortgages benefit people who want lower monthly payments so they can save the capital more quickly to pay it off at the end. Alternatively.... It gives people somewhere to live very cheaply and allows people's house to grow in value so they get a hefty profit at the end.

It would be so unfair for the government to intervene here. These people would have had 25 years of lower mortgage payments... A massive rise in their house value and then get some sort of state intervention. All at the fault of extremely poor planning

You can almost hear Corbyn crying about it now!

Django x2 · 24 Jul 2017 at 16:33

I'm not entirely sure this is a big issue. It's a calculated risk, one that often pays off very handsomely.

A GP friend of mine bought a very elite property years ago in Sandbanks. A massive house, huge in fact. Back then, circa 2005, £500k now worth £1.2m
His kids have all grown up and left, and his wife and him are more than happy to now sell it and downsize. You would have had to pay this interest anyway so it's not really throwing money away. He can now move to a genuine £700k house, mortgage free. Hardly bad man maths....Property outperforms every other investment type and given my friends scenario, he is still working and intends to live there until retirement. The value of the house will likely have gone up again.

SexyGreyFox · 24 Jul 2017 at 17:40

dowie said:
you're then focusing on an anecdote from a single poster who claims some figure that may or may not have been promised and that we have to accept his word that he wasn't written to - that may or may not be the case (I'd be slightly skeptical) but regardless the 1.2k shortfall isn't exactly the end of the world.

That's not very nice

but you're right, £1,200 wasn't a great amount and Mrs Sexy did say we were told at the time it could go up or down.

Martini1991 · 24 Jul 2017 at 18:07

Jokester said:
She only borrowed £182k, she can still sell the house and end up with £318k, the poor woman.

This is exactly what I think in this case

Overall I think people who took on interest only mortgages and haven't a payment vehicle deserve any financial suffering they get as they put themselves in the situation.

D.P. · 24 Jul 2017 at 19:24

Django x2 said:
I'm not entirely sure this is a big issue. It's a calculated risk, one that often pays off very handsomely.

A GP friend of mine bought a very elite property years ago in Sandbanks. A massive house, huge in fact. Back then, circa 2005, £500k now worth £1.2m
His kids have all grown up and left, and his wife and him are more than happy to now sell it and downsize. You would have had to pay this interest anyway so it's not really throwing money away. He can now move to a genuine £700k house, mortgage free. Hardly bad man maths....Property outperforms every other investment type and given my friends scenario, he is still working and intends to live there until retirement. The value of the house will likely have gone up again.

Just hihglighitng that this is infact false. Long term a simple FTSE100 tracker will outperform property. If that wasn't true then no one would bother investing in the stock market.

Psycho Sonny · 24 Jul 2017 at 19:32

D.P. said:
Just hihglighitng that this is infact false. Long term a simple FTSE100 tracker will outperform property. If that wasn't true then no one would bother investing in the stock market.

Does that include rental income from the property or just the increase in property?

you could drop £20k deposit on a £100k flat rent it out for 30 years which covers all the fees and mortgage and walk away with like £200k from a £20k initial investment

Jokester · 24 Jul 2017 at 20:05

A £20k investment netting 10% a year will let you walk £350k after 30 years.

Deleted member 77746 · 24 Jul 2017 at 21:42

I blame sales people who miss sell... get a signature and then get the commission and run. Once there is a signature thats it. Until years later like PPI e.t.c comes about then someone foots the bill.

We are all to blame.

FurryLemon · 24 Jul 2017 at 21:54

I love stupid people (sometimes). I snapped up some lovely houses on the cheap during the 2008 financial crisis.

HungryHippos · 24 Jul 2017 at 22:12

An interest only mortgage is what it is, nothing more. People who can't save should not be taking one out, it's totally reliant on you investing/saving the money instead of giving it to the bank along the way.

Endowment policy mis-sales not withstanding, people like the one in the OP are to blame, not the mortgage product they decided to go with. If they don't have the money now, then they would never have had it, and the bank would have foreclosed on the house ages ago.

What they have effectively wound up doing is renting for 10 years, whilst enjoying the house price rise. Not exactly something to be sniffed at, they may have to sell and downsize, but they will have made some serious profit on a London property which they would not have been able to afford otherwise.

coolsurfer · 24 Jul 2017 at 23:35

neil_g said:
Aren't buy to let mortgages interest only? Or did I dream that?

Nope mine is a repayment BTL mortgage.

Django x2 · 25 Jul 2017 at 00:32

D.P. said:
Just hihglighitng that this is infact false. Long term a simple FTSE100 tracker will outperform property. If that wasn't true then no one would bother investing in the stock market.

not for the last 30 years it hasn't been. Certainly with the property slump the FTSE looked strong, but then it would do in comparison, but over significant term, the FTSE is always in the shadow.

https://londonpropertyanalyst.co.uk/wp-content/uploads/2015/01/6-Price-curve-vs-FTSE.jpg

Tefal · 25 Jul 2017 at 05:22

Jokester said:
A £20k investment netting 10% a year will let you walk £350k after 30 years.

Where are you getting a 10% year on year return?

Sure as hell aint a ftse100 tracker which is about 4%

Psycho Sonny · 25 Jul 2017 at 08:21

Django x2 said:
not for the last 30 years it hasn't been. Certainly with the property slump the FTSE looked strong, but then it would do in comparison, but over significant term, the FTSE is always in the shadow.

https://londonpropertyanalyst.co.uk/wp-content/uploads/2015/01/6-Price-curve-vs-FTSE.jpg

Looks like the ftse crashes every time it hits a certain amount and every so often.

Investing in one now it's likely that you would lose money as it's likely on a high.

Property does seem like the better investment.

People who play the market are just gambling after all.

muon · 26 Jul 2017 at 19:11

Django x2 said:
not for the last 30 years it hasn't been. Certainly with the property slump the FTSE looked strong, but then it would do in comparison, but over significant term, the FTSE is always in the shadow.

https://londonpropertyanalyst.co.uk/wp-content/uploads/2015/01/6-Price-curve-vs-FTSE.jpg

Crap websites always do this incorrect comparison.

Most of the money you make from shares is via dividends. Issuing dividends lowers the share price and so you need to find a fund which reinvests dividends to get a proper comparison.

Property does also yield rent but it requires you to put in some effort or pay someone to manage the property. With companies you have CEOs running the business for you.

http://www.hl.co.uk/funds/fund-disc...bc-ftse-100-index-class-c-accumulation/charts

60% in 5 years for FTSE 100 tracker fund.

Destination · 26 Jul 2017 at 19:22

How did it do in the 5 yrs prior?