General Chat

I can empathise with those mis-sold interest free mortgages as I was mis-sold and endowment mortgage. I don't think its fair to call anyone stupid in any context and certainly not in this one. I can't speak for anyone else, but for my own part I was a lot younger and trusted my bank manager to find the right type of mortgage for me, I feel there may be another influx of claims for mis-sold mortgages and rightly so. The banks really should have thought about this more clearly esp given the endowments. Thankfully, I managed to change mine to repayment or I may have lost the house. Good thread Rose x

We had a mortgage like Chris, based on husband's wage. It was restricted to two and a half times his gross salary. That meant that the repayments were about one third of his net income and assumed to be affordable.

I think one of the problems nowaday compared with years gone by is that a mortgage was for for a fixed term of 25 years for new property and 20 years for older property or less years if preferred.
When the young ones talk about getting a mortgage, the rate of interest might only be for a fixed term of two years then they have to start looking for some other favourable deal.
If the interest only was a 'deal' for ten years the lender can technically call in the loan, the sort of thing which happens to business people when they have a cash flow problem but lots of work and they end up bankrupt.
When the market was buoyant I read in the paper that the banks, I think Hx, were wanting a chunk of the profit where property had risen in value more than inflation.
I still think more heads should have rolled because of the state of the banks and agree with Chrisof Wessex about the criterion for getting a mortgage in the 60's. -jl

I was offered an interest only mortgage in the late 90s in order to buy my council flat.
The repayments would have been similar to the rent i was paying, but in order to have the money to pay off the capital I would have needed some other form of regular savings, or be prepared to sell the flat at the end of the term & have no home.
In the end I didn´t buy it which was a shame because by the time I retired it was worth nearly 4 times the amount of the loan & I was planning to move when I retired anyway.
Missed the boat again :-| :-| :-|
Now, 10 years after retiring, I´m still having to rent.
Ah well.

It was endowment mortages I was writing about, could not for the life of me remember the correct term.

And I do know the difference between Insurance and Assurance

When we first had a mortage in mid sixties - the only monies taken into account were OH's basic wage. No overtime, no wage of a wife and no stud fees earned by cat!!!

Never heard of interest only but common sense must prevail surely.

Nowadays - well in the last 20 or so years, everything monetary is used, then when redundnacy/unplanned pregnancy occurs these throw a spanner in the works.

InspectorGreenPen,

Thank you for giving facts and talking common sense.

You obviously know what you are talking about.

One thing i have learned in life, that nothing comes free, however large or small. If you remember that, you cant go far wrong.!!
Might seem a bit cynical, but mostly true. If you take any cold call, dorstep selling, etc., it is always trying to get you to buy something, whatever they say.
Common sense, that if you take out a loan, you have to pay it back. All of it.

Sue

We had repayment mortgages (from 1971) then an interest only mortgage added to pay for an extension, backed up by a with profits assurance policy.

When just the interest only loan was left we treated it as a repayment mortgage and paid more than just the interest so it was paid off shortly before I retired.

However, as a fall-back poition we had savings and inherited money that we could have used to pay it off at the end even if we had not been overpaying, so there was never any chance that we would not be able to repay.

IGP puts his finger on what I believe is the problem. We believed that house values were always safe and we wanted the nicest possible house we could afford. Probably a lot better than we could afford.

Incomes were on the increase, property values were spiralling upwards, we watched these property programmes with many ordinary folk with a budget of £500,000 to £1m to buy a 2 bedroomed terraced house in Stratford East - only stipulation a public park within 5 miles and an inside toilet.

And we sat in our rather lovely house on an interest only loan knowing we could easily sell it for millions in a few years time, pay off the £100,000 mortgage at a stroke and buy a lovely cottage in South of France, sink the rest into an annuity and retire gracefully at 55.

What on earth could go wrong? Well, 1.3m householders might be able to explain. And I am sure most of them accept it is their own overstretching/greed and accept a lot of the responsibility for the mess they might well be in financially.

The problem of miss-selling is a difficult one and can't really be compared to that of PPI.

The first question must be what it was that was actually miss-sold in the first place and by whom? Many mortgage packages were 'assembled' as it where by a number of different players. The could be a bank, or building society, a broker, and insurance company and so on, so which one was at fault?

As I said earlier, the lender is in the strongest position legally because of the mortgage deed itself, allowing him to obtain possession if the terms are breached. The court is not interested why the terms were breached only that they have been.

My son had an interest free mortgage, with no arrangements in place for repayment some 15 years or so ago. The terms were to pay interest x% interest amounting to £y per month until the year dd/mm/yyyy or such time as the property was sold when the capital amount became due.

He sold the house after a few years as he was finding it difficult to meet the interest payments and made a 20K profit after paying off the loan. Had it sold for less then he would have had to fund the shortfall, but hardly a case for claiming miss-selling.

The only time that I can think a claim for miss-selling might have any substance is when it could be proved that as part of the overall mortgage package, the borrower was sold an investment product such as insurance, ISA, shares or whatever, with the express assurance that this investment would generate specific returns.

The likelihood of such a claim getting very far is remote.

Misrepresentation? as John said, perhaps.

I think that many mortgage providers, especially the banks, from the late 1980's "encouraged" people to take out interest only mortgages, and when doing so, did not ask for details of how the capital amount of the mortgage would be repaid.

These institutions, despite knowing the risks, had decided to grab a share of the lucrative sub-prime lending market. Sub-Prime Lending in simple terms is, making loans to people who may have difficulty maintaining the repayment schedule for the loan.

To use JohnLovesHorlicks figures, what happened was a lender would tell a borrower that they might have difficulty meeting the £1300 a month for a repayment mortgage from their income. The lender would then tell the borrower not to worry as they could offer them an interest only mortgage which they could afford, as it would only cost them £1,000 a month.

The borrower must have known that the capital sum would have to be repaid at some point, however, the borrower's priority was to get the property they were after, so they grabbed what was on offer, unfortunately when they did so, they believed that the value of their property would increase, alas we have seen what followed the financial crash.

I am not sure whether miss-selling did or did not take place, but I am sure that many people were told that the interest only option was the best route for them, that must come within the definition of misrepresentation, and it will be interesting to see if the sale of interest only mortgages follows the same road as the sale of PPI insurance ;-)

Gins, My drugs have always been the same as yours, Fags and booze :-D

The main thing to remember with endowments are they where basically a savings plan linked to the markets/investment and their for the value can go down as well as up.

it was in the 1980 when endowments saw growth as a direct result of them being linked to mortgages, they went tits up for two reasons first because of the markets under performing which was where your money was invested and possibly more so because government had started to reduce the amount of tax relief "Mortgage interest relief" on mortgages, then when our good friend Mr Brown hammered the last nail in the coffin when he removed it altogether

http://www.hmrc.gov.uk/statistics/mortgage.htm

Roy

As when he robbed private pensions of 5 billion a year in tax relief they also went tits up

The Mortgage, is actually the deed that you sign which creates a legal charge over the property as security for the debt. You are the Mortgagor, the lender the Mortgagee.

The very fact there is a Mortgage puts the lender in a very strong position legally if the borrower defaults.

Whilst you, not the lender, is always the legal owner of the property the mortgage deed gives the lender the right to gain possession, through the courts, if you default on the terms of the borrowing, and sell the property as Mortgagee in Possession. You can also be sued for the balance if there is a shortfall.

In looking at the situation borrowers find themselves now, the problem here is in trying to generalize. No two cases are exactly the name.

The first thing to note is that an interest only mortgage is what it says on the tin. You pay back the interest, but not the capital.

The second point is how you pay back the capital, and this is where it gets more complicated as there a many different ways this can be done, but at the end of the day, you as the mortgagor are responsible.

You could choose to make no prior arrangements, relying on selling the house at some point to pay off the balance.

You might be in line for an inheritance.

You could have savings due to mature at some time, an ISA, investment in shares.

A lump sum on retirement

You could have a an insurance policy, an assurance policy or a combination of both.

My parents had a with profits policy where the sum assured equalled the amount of the borrowing. Had one of them died then the loan would have been paid in full. As it happened both lived to maturity and the profits equated to an amount similar to the sum assured so they received a nice bonus.

You could have a combination of all these, or something else - as I said no two circumstances are the same.

The hope is that lenders take a sympathetic approach. They can not be expected to simply write off the debt but could help, possibly by offering to extend and or vary the terms of the borrowing.

Roy 'what drugs where you on' :-D

It has to be said there was not enough regulation in the 1980/90s in respect of the financial industry and there were indeed a lot of 'scum bags' out there, selling 'pups'

I do feel for the people who were mis-sold, the mortgage market can be very complicated to people who know nothing about the workings of it

:-0

My daughter has an interest only mortgage, taken out 10 years ago. She will soon have to move onto repayment to ensure it is paid before retirement. Although she has always been aware that she had to pay off the capital, at no time was she ever told this or, and to my surprise, encouraged to take out some savings plan to run alongside it.

I think it may have been in the lender's interests at that time to not deter people by adding extra expense.

Vera

We had an endowment policy...If one of us died the mortgage would have been paid up .....we had enough, just, to pay up once the policy had matured.....due to there being less available than at first expected.

Mortgages are sometimes complicated, especially when being sold one by over eager or lying rat bags .....I can fully understand why some people could have been sold a pup....whether they were intelligent or not......especially when the goalposts were forever being moved and many documents not being worth the paper they were written on.....It makes me laugh that a legally binding document is open to change at any given moment by the other side.....imagine us deciding to change the rules half way through payments.

Lynda, I am sum what confused that you single my comments out whilst Rose is basically saying the same as me re interest only, yet you say to Rose,

" Rose I realise you weren't having a go at anyone particular"

Why then do you think I was having a go at anyone in particular?

~Lynda~ Report 2 May 2013 21:24

How wonderful to read you think me stupid Roy, not knowing the circumstances as to why I think I was mis-sold my mortgage.

That was before I addressed any post directly to you on any of my posts

Roy

Lynda, I object to your comment "Roy you obviously have never had anything go wrong in life, so you wouldn't understand"

Lynda, You have absolutely no idea,

I have had varying financial circumstances through out my life as most others have and even been destitute at one point having no roof over my head and having to sleep rough so don't assume anything thank you.

I am not knocking anyone for taking out any mortgage, interest free or any other kind, I merly state the obvious, interest only means interest only if you don't understand that then that's your problem

Roy

Roy you obviously have never had anything go wrong in life, so you wouldn't understand as to why some people took interest only mortgages, so I won't bother telling you, but I will say peoples circumstances do change, believe it or not.

Rose I realise you weren't having a go at anyone particular