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Interest only time bomb


One percent

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Just a guess: interest-only mortgages will be able to be transferred to the next-of-kin and added to their mortgage.

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sleepwello'nights

I took out an interest only mortgage in the early 2000s. When it was approaching maturity I contacted the lender and asked what I could do as I might not be able to repay the principal at the end of the term. To my astonishment they allowed me to extend it until the later of mine or my wife's 75th birthday on the same terms. 

Naturally as it was at a very low interest rate base rate tracker I extended the term. Since then we have been fortunate that our house has increased in value as have our investments. Sure there's an element of risk, so far so good.,

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22 hours ago, DTMark said:

Just a guess: interest-only mortgages will be able to be transferred to the next-of-kin and added to their mortgage.

Pretty sure that'll happen.  No way will they let the ticking bomb actually explode.

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Frank Hovis

Japan had inter-generational mortgages before their decades long property slump; it's one of the last props that can be brought to bear.

I have been looking at some very expensive (for Cornwall) houses and estimating what they will be going for post crash; if I'm right I may buy one as I don't intend stretching myself to get one now.

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It won't be mandatory, of course.

There will be no compulsion for you to sign up to guarantee or pay your parents' mortgages.

Only if you don't want to see them homeless or living with you.

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B-b-but nobody told me that interest only meant it was only the interest. I've been ripped off and demand that I am fully compensated.

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Moneybox live had this as a feature.

Some old biddy who had a house as a BTL in liverpool - lots of sympathy poured on her, she felt like she didn't realise that is was IO.... jesus fucking christ they really are trying to push the narrative aren't they?

WHICH PART OF FUCKING INTEREST ONLY  DID YOU NOT UNDERSTAND - IT WAS NOT MISS-SELLING!

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One percent
10 minutes ago, JFK said:

Moneybox live had this as a feature.

Some old biddy who had a house as a BTL in liverpool - lots of sympathy poured on her, she felt like she didn't realise that is was IO.... jesus fucking christ they really are trying to push the narrative aren't they?

WHICH PART OF FUCKING INTEREST ONLY  DID YOU NOT UNDERSTAND - IT WAS NOT MISS-SELLING!

I see the next excuse for helicopter money on the horizon. Give the little people some free money to spunk away on deposits for new cars on the never never. 

Sadly this money only goes to the feckless. I guess that if they give it to the sensible, they know that the likelihood is that it will just be saved. 

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On 7/26/2017 at 22:39, blobloblob said:

B-b-but nobody told me that interest only meant it was only the interest. I've been ripped off and demand that I am fully compensated.

You jest, but this will happen. The saver sorts aren't what the gubbermint wants. Spend it, don't save it, and if it all goes tits up for the umpteenth time, we'll print some more of it.

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On 26/07/2017 at 22:39, blobloblob said:

B-b-but nobody told me that interest only meant it was only the interest. I've been ripped off and demand that I am fully compensated.

My sister and bro in law (who are both teachers) have a house that they rent out that's on an interest only mortgage.  They aren't the sharpest tools in the box and I think they honestly believe they are paying the mortgage off.  I don't think they realise that they still have to pay the capital off at the end of the term and have nothing in place.  They struggle to pay the mortgage on the house they live in every month.  Bro in law mentioned to me the other day that he now what's to buy a holiday home abroad somewhere O.o

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The Masked Tulip

I was on a US financil forum this week and a UK BTL landlord was saying about how much money he has made from renting. He fears a recession because he thinks his tennants will be unable to pay. But he had decided not to sell hsi 5 properties until next year.

The BOE keeps the IR level at 0.25%.

Carney is desperate to keep IR's low as he knows that the housing bubble would burst with rising rates. The longer he leaves though the wrost things will ultimately be.

I suspect he is gambling on - or already knows - that the US will not raise further. If the US does continue to raise, as the Fed says is their current intention, then the UK will have to play catch--up eventually.

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Frank Hovis
5 hours ago, The Masked Tulip said:

I was on a US financil forum this week and a UK BTL landlord was saying about how much money he has made from renting. He fears a recession because he thinks his tennants will be unable to pay. But he had decided not to sell hsi 5 properties until next year.

The BOE keeps the IR level at 0.25%.

Carney is desperate to keep IR's low as he knows that the housing bubble would burst with rising rates. The longer he leaves though the wrost things will ultimately be.

I suspect he is gambling on - or already knows - that the US will not raise further. If the US does continue to raise, as the Fed says is their current intention, then the UK will have to play catch--up eventually.

It doesn't need to raise the BoE rate; it can stay there forever.

If however the US rates keep riisng then the yield people will demand upon new gilts issues, as they're being sold into a global market, and this will take UK market rates up and mortgage rates up with them.

Though in this event Carney will be a laughing stock so he will try to shadow market rates up to maintain a pretence of control.

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One percent
11 minutes ago, spunko2010 said:

Missed this... watch for 50 Pound notes to be withdrawn due to "high crime rates"

 

https://twitter.com/JamesGRickards/status/893293678793543680

Time to invest in a few more digital currencies I think. 

Is this to discourage the hoarding of money under the mattress away from banks, or to encourage us to use plastic instead of cash? 

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Chewing Grass

Bank rang me up yesterday and offered 0% on any credit card balance transfers for 3 years. So money truly has no value but debt must!

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On 8/4/2017 at 18:43, One percent said:

Is this to discourage the hoarding of money under the mattress away from banks, or to encourage us to use plastic instead of cash? 

Nope - more like they want negative rates next. You read it here first...

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One percent
8 minutes ago, spunko2010 said:

Nope - more like they want negative rates next. You read it here first...

Are we going to turn all Greek?  Haircuts for all the savers so as to bail out the entitled feckless. 

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4 minutes ago, One percent said:

Are we going to turn all Greek?  Haircuts for all the savers so as to bail out the entitled feckless. 

Fuck the savers. Theresa will next be buying the debts of your PCP-financed car off you, in order to save the economy environment

xD

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One percent
16 minutes ago, spunko2010 said:

Fuck the savers. Theresa will next be buying the debts of your PCP-financed car off you, in order to save the economy environment

I fucking hate politicians 

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sleepwello'nights
On ‎03‎/‎08‎/‎2017 at 10:28, ILikeCake said:

I don't think they realise that they still have to pay the capital off at the end of the term and have nothing in place.  

Just like renting really!  

Is/was it such a bad strategy? When we took out our interest only mortgage our intended method of repayment on the application form at the end of term was from the sale of the mortgaged property. As it turns out it by taking out an interest only mortgage the monthly interest is far lower than we would have had to pay to rent a similar size property in the area and if we sold at the end of the term we would have the full benefit of the increase in value. So lower monthly outgoings and a lump sum at the end. Win, win, what's not to like?

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Frank Hovis
11 hours ago, sleepwello'nights said:

Just like renting really!  

Is/was it such a bad strategy? When we took out our interest only mortgage our intended method of repayment on the application form at the end of term was from the sale of the mortgaged property. As it turns out it by taking out an interest only mortgage the monthly interest is far lower than we would have had to pay to rent a similar size property in the area and if we sold at the end of the term we would have the full benefit of the increase in value. So lower monthly outgoings and a lump sum at the end. Win, win, what's not to like?

Yes it can be ok if you regard it as a lower form of rent but it does heavily rely upon the property being worth equal or more at the end of the term to its value at the start of the term.

In the past with the shorter boom / bust cycles of the UK housing market I couldn't see your losing on this basis but now the cycles have got longer and the boom has been artifically prolonged I think it very possible that even in nominal terms you could be looking at a big loss on a house bought in 2003 25 years on in 2028.  As long as you have savings to meet that shortfall not a problem and just IO remortgage again but not everyone does.

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