Misery over the mortgages that can't be paid back:

[dipsydoodle]

FSA report reveals interest-only deals have turned into a £100bn 'time bomb'

Millions of families who took out interest-only mortgages during the boom years may never be able to repay them, a damning report warns today.

A ground-breaking investigation by the financial regulator into Britain’s home loan market reveals that these deals have turned into a £100billion ‘ticking time bomb’.

An interest-only loan is cheaper because it allows people to pay back only the interest on the loan. In theory, the homeowner saves up separately to pay off the original amount when the loan term ends.

But the Financial Services Authority report reveals up to three in four borrowers have ‘no reported repayment strategy’ – meaning that when their loan needs to be repaid, many will be forced to sell their home.

Read more: http://www.dailymail.co.uk/news/article-2222737/Misery-mortgages-paid-FSA-report-reveals-deals-turned-100billion-time-bomb.html#ixzz2AItPTPi4

[Riley18]

1. Most will probably lose their homes back to the company that set them up.

I hope they get some government help when the time comes. I did not get any help with my modification. I wake up every morning trying to figure out how to get enough money to go rent a place decent enough for my family. Now a friend of mine who doesn't follow politics got a great modification because she was a "responsible" homeowner. Too bad for me that in my four year fight for a modification I couldn't make all the full payments. Those of us who lost our homes to corrupt banks are all but forgotten now on the national level. I hate to say it, but it played out exactly like Romney recommended a year ago. He said let the houses go back to the banks, and that is exactly what happened.

[dipsydoodle]

2. The manner in which you've expressed that

makes me think you're not UK - your terminology is similar but differs slightly from ours. Those who arrange mortgages here are restricted on commission and broadly speaking sell only what people want. It was only since the late '90's that non status mortgages came to the fore. Those allowed some to go outside of the parameter that mortgages should not exceed c. 3.5 gross annual income but that is now back under severe correction.

Conventionally interest only mortgages were tied to something like an endowment policy set up to ensure repayment of the capital when due. I myself had one between 1986 and 1991 which was tied to a pension plan. Until paid the owner is effectively renting the proportion of the property against which the charge exists. All such charges here are registered with the Land registry Office.

Although not mentioned in the article many of the interest only mortgages here relate to the "buy to let" market where the rental income exceeds the interest payments - soon as that ceases to be the property is sold off because default on a payments could prohibit further mortgages in the future.

There had become an irrational belief here that houses would always go up in price and that was despite the property crash which occurred here late '80s following the ending of multiple tax relief to joint mortgagees which coincided with very high interest rates related to inflation. They were wrong.