No - it wasn't like the great Endowment mortgage saga of the late 1980s, where salesmen really did confuse housebuyers (including yours truly). There was no mis-selling of interest only mortgages. The very name is pretty self-explanatory. Interest only means that you are ONLY arranging to pay off the INTEREST on the loan to the bank or building society. Working out how you repay the CAPITAL is YOUR RESPONSBILITY.
I don't want to sound self-righteous here, but when I took out an interest only mortgage in 2004, it was made crystal clear to me by the man who arranged the mortgage for me (who happened to be a Christian, I hasten to add) that on top of the monthly interest payment, it was up to me to find an extra £50,000 over the next 10 years to pay back the actual loan. I did my sums and worked out that I could start paying off the capital after just a few months - indeed, until I cleared the debt, I viewed it as a sort of flexible repayment mortgage which I was able to repay as and when. Of one thing I was never in doubt - that £50,000 had to be found from somewhere. Thankfully, I was able to clear it in only 4 years.
According to the Financial Conduct Authority, it seems like over 10% of people who have taken out an interest-only mortgage are not in such a favourable position. They are only repaying the interest and have no idea how to repay the capital. Some 1.3 million homeowners are apparently in this position, and the average shortfall is £71,000.
Reading through the tweets and other comments on the various articles on this topic, it comes as no surprise to find some individuals suggesting that "the government" ought to bail these poor people out who might otherwise lose their homes. Doubtless, we'll see similar comments from Shelter's website before too long. But hang on a minute! Who fills the government's coffers? It's, you and I - the UK taxpayers. What such people are in effect saying is that those of us who either shied away from interest only mortgages or else took them on with a determined strategy to pay the capital off should bail out those who took on a bigger debt than they could service. In other words, the responsible ought to be bailing out the irresponsible.
The nature of capitalism is that you sometimes find yourself taking a risk and sometimes, that risk goes pear-shaped. I feel for people who may have to suffer repossession or downsizing - particularly the innocent children of parents who over-committed themselves, but if "the state" (i.e., you and I) is always required to provide a backstop, then responsible people will be penalised for being responsible, and irresponsibility will flourish. People managed to pull through the negative equity problems of the 1990s, and our Victorian forebears survived banking collapses without state intervention, even though it was unquestionably tough for some of them. It's time people's eyes were opened - the state is the solution to very few of life's problems and the cause of all too many of them.
I don't want to sound self-righteous here, but when I took out an interest only mortgage in 2004, it was made crystal clear to me by the man who arranged the mortgage for me (who happened to be a Christian, I hasten to add) that on top of the monthly interest payment, it was up to me to find an extra £50,000 over the next 10 years to pay back the actual loan. I did my sums and worked out that I could start paying off the capital after just a few months - indeed, until I cleared the debt, I viewed it as a sort of flexible repayment mortgage which I was able to repay as and when. Of one thing I was never in doubt - that £50,000 had to be found from somewhere. Thankfully, I was able to clear it in only 4 years.
According to the Financial Conduct Authority, it seems like over 10% of people who have taken out an interest-only mortgage are not in such a favourable position. They are only repaying the interest and have no idea how to repay the capital. Some 1.3 million homeowners are apparently in this position, and the average shortfall is £71,000.
Reading through the tweets and other comments on the various articles on this topic, it comes as no surprise to find some individuals suggesting that "the government" ought to bail these poor people out who might otherwise lose their homes. Doubtless, we'll see similar comments from Shelter's website before too long. But hang on a minute! Who fills the government's coffers? It's, you and I - the UK taxpayers. What such people are in effect saying is that those of us who either shied away from interest only mortgages or else took them on with a determined strategy to pay the capital off should bail out those who took on a bigger debt than they could service. In other words, the responsible ought to be bailing out the irresponsible.
The nature of capitalism is that you sometimes find yourself taking a risk and sometimes, that risk goes pear-shaped. I feel for people who may have to suffer repossession or downsizing - particularly the innocent children of parents who over-committed themselves, but if "the state" (i.e., you and I) is always required to provide a backstop, then responsible people will be penalised for being responsible, and irresponsibility will flourish. People managed to pull through the negative equity problems of the 1990s, and our Victorian forebears survived banking collapses without state intervention, even though it was unquestionably tough for some of them. It's time people's eyes were opened - the state is the solution to very few of life's problems and the cause of all too many of them.