Emailed in by MBK, from The Telegraph:
According to analysis by ratings agency Moody’s, there are about 52,000 borrowers aged over 60 in the UK on interest-only mortgages that mature before 2016 and who have less than 20pc equity in their homes.(1)
With the regulators cracking down on interest-only deals and rates expected to rise in the next two years,(2) the group is unlikely to be offered equivalent terms to those they are on, Moody’s warned. "Older borrowers with interest only loans face refinancing risk," it said.
Annabel Schaafsma, a manager in Moody’s structured finance group, said: "The most at-risk group are those with deposits of less than 20pc. Some will have to use their savings to repay the mortgage.(3) Others will have to downsize.(4)"
The analysis is surprising as older borrowers have been the main beneficiaries of a massive housing boom, with house prices trebling between 1997 and 2010 alone. However, separate research by Fathom Consulting suggested they may be carrying large debts because they released equity to help their children.(5),(6)
1) How on earth is that possible? Assuming a 60 year old couple bought 30 years ago with a 75% mortgage when the average house price was £26,307 (Nationwide), their mortgage principal was £19,730 (I'm not even sure that there were many interest-only deals 30 years ago, but let's assume), then assuming an average house price today of £163,000, they have 88% equity (more or less for free). So basically they must have pissed about £110,000 of mortgage equity withdrawal up the wall in the mean time.
2) The Homey élite have been spinning this one for five or six years, it is all part of the plan to stampede people into "getting onto the property ladder now" (quite why is a mystery; if people really believed that interest rates would go up, then all things being equal, hosue prices would go down).
3) Thus reinstating what the position would have been had they taken out a repayment mortgage.
4) Probably a good thing in and of itself; that way we don't need to build so much new housing for the next generation.
5) That's a lie. People who took out interest-only deals 20 or 30 years ago could not possibly have assumed that prices would sky-rocket the way they did. And those who took out a second mortgage recently to "help" their children into a lifetime of debt slavery probably wouldn't have been given an interest-only mortgage anyway.
6) This is the Achilles' Heel of Home-Owner-Ism. It's all well and good sitting around gloating about how wisely you invested, but sooner or later surely it will dawn on people that not only have they ruined their children's lives but that they are getting dragged back to the bottom of the pyramid? Or maybe not.
Boo hoo! Ah diddums! Etc!
Info Post
0 comments:
Post a Comment
Click to see the code!
To insert emoticon you must added at least one space before the code.