Currently viewing the tag: "loan"

 

Interest Only Mortgages Are A Ticking Time Bomb

Interest Only Mortgages Are A Ticking Time Bomb

Over 1 million landlords and homeowners with interest only mortgages could face financial difficulties when reach the end of their tenure and they have to pay them off, according to the Financial Conduct Authority (FCA).

The FCA estimates that around half of the 2.6 million or so UK property owners with interest only mortgages, which represents about a third of all UK mortgage holders, will not have savings or other funds to cover the final bill.

With these mortgage holders only paying enough to cover the monthly mortgage interest on the amount borrowed, the average shortfall is £71,000 (GBP) per person, according to FCA research.

The FCA, the successor of the Financial Services Authority (FSA) as the sector’s watchdog, commissioned research to give a clear indication of what borrowers face when mortgages mature between now and the year 2041.

Market research firm GfK NOP questioned 1,103 interest only mortgage borrowers to consider how prepared they were to repay their loans.

The study found that 37% of borrowers with an interest only mortgage faced a shortfall in their plans to pay back the lump sum of the home loan, based on their own calculations.

But the FCA believes that many people have seriously underestimated the severity of the financial problem and believe the true percentage to be around 48% of all residential property owners with interest only mortgages will face a shortfall.

The vast majority of interest only mortgages were taken out by property investors and residential homebuyers before the financial crash, according to Martin Wheatley, Chief Executive of the FCA, who stated: “It’s just that people were optimistic about the future. My advice to borrowers is not to bury their head in the sand. This report is a call to action.”

The interest-only mortgage time bomb is a serious problem for property investors without an exit strategy and potentially terrifying for homeowners who have no means in place to repay the capital of the original loan.

The media have already stirred up a fervour of anguish with overemphasised coverage on the negative aspects of taking out an interest only mortgage, almost as if they are acting in the interests of the mainstream mortgage lenders attempting to get property owners to switch to repayment mortgages immediately.

The media coverage suggests that interest-only mortgages are a disaster waiting to happen for property investors and residential homeowners with at least 60,000 borrowers facing capital repayments by 2020 without any means of being able to pay back the loan and another 260,000 facing the same financial crunch over the next 30 years.

Graham Lock of House Network said that the FCA is guilty of scaremongering, stating: “People use interest-only mortgages to get on the ladder and they can choose to switch to a repayment option at any time once it becomes affordable. Wage inflation will take care of most of this added with the fact that most of us will work until we’re 70 means there is plenty of time to switch to repayment in the future.”

Executive Director of the Intermediary Mortgage Lenders Association (IMLA), Peter Williams, added: “By confirming that nine in every ten interest-only (IO) mortgage borrowers have a repayment strategy in place, the FCA’s research should put an end to misguided reports of a mis-selling scandal when the market boomed between 2002 and 2007. Having said that, as both the Experian report for the FCA and the GfK report shows, there are issues for the industry to deal with.”

Emergency Property Investment Manifesto

Grab Your Copy Now

 There has NEVER been a better time to invest in property!

 The mood of the nation appears to have changed and optimism is back! 

Are you sick and tired of banks, building societies and high street lenders lying to you about lending and telling you how ordinary people can’t borrow money? 

It’s a load of bull!

Banks are lending but, Branch managers have been told to be selective and offer funding but they don’t want the general public to know about it.

What’s the big secret? 

It’s time for property investors to strike back and take revenge for all the stress caused by the banks and the best way to get revenge is to get even! 

Better still, wouldn’t it be so much sweeter to beat the bank at their own game?

So if you want to take your revenge on the banks then you need to  

Grab a copy of the Emergency Property Investing Manifesto

This amazing and insightful report is written by Rob Moore & Mark Homer, mega successful full time property investors and triple best-selling authors, details the state of the property investment market and 7 critical strategies you must follow in 2012/13 if you want to discover:

  • What the Banks and Government Big Wigs don’t want you to know…
  • How to have an unfair advantage for your next property acquisition
  • How to predict the property market cycle AND be years ahead of the masses
  • Why competition is another fabrication of the TRUTH you’re NOT being told
  • 7 truths most ‘EXPERTS’ won’t tell you, and the alarming reasons why
  • And much, much more…

 Take advantage of the insight contained in this manifesto to kick start your property investment career and

Grab a copy of the Emergency Property Investing Manifesto

New data released by the UK’s Council of Mortgage Lenders (CML) shows that Monthly mortgage payments on residential properties in October 2011 were the most affordable for nearly eight years, but due to increased regulation, lending numbers dropped.

Although First-Time Buyers’ (FTB) deposit requirements have remained stable in recent months at an average of 20%, their monthly interest payments have continued to fall and now typically consume 12.3% of income, the lowest level since January 2004.

Affordability for movers also improved, with this group paying an average of 9.2% of income on mortgage interest, the lowest level since monthly records began in 2002. However, despite the improved affordability of monthly mortgage payments, lending activity has slowed.

In October 2011, 44,500 loans for house purchase were advanced, down from 48,200 in September and from 46,900 in October 2010.

Of the 44,500 loans, 16,400 went to first-time buyers, down from 18,200 in September 2011, down 1% on October last year.

Mortgage affordability is one thing, but the lack of deposits remains a major factor in holding back the housing market, especially for first-time buyers.

Tagged with:
 

There Will Never Be A Better Time To Invest In Property

MyPropertyPowerTeam.co.uk helps property investors and landlords build their own property power team to enable them to profit from property - Visit our main site now!