Lenders warn of home losses as interest rates bite

[pipme]

http://www.timesonline.co.uk/article/0,,2-1589109,00.html

...Borrowers who took out £150,000 interest-only home loans in mid-2003 could have secured a two-year fixed rate of 3.59 per cent. But with such deals running out shortly, they could face a standard mortgage rate of about 6.75 per cent, driving their payments up by £394 a month, or £4,725 a year. If they were to take out the best available new two-year fixed-rate deal, at 4.68 per cent, the extra bill would still come to £1,635 a year....

And all of that before the BOE starts increasing rates due to inflation .. tis there to see .. in the RPI (Retail Price Index) .. not CPI (Consumer Price Index).
There is a strong feeling on Bank rate increases after the election ... allegedly BOE will hold off will not want to appear biased during election run up.

 

[felix]

If you mortgage yourself up to the hilt there is always a risk that your income will not rise fast enough to keep up with rising interest rates. There is also a risk that the house you bought was overpriced in the true bricks and mortar sense rather than by the estate agents maxim "a house is worth what somebody is prepared to pay for it". This can leave you with a house you can't afford to keep but also can't afford to sell.

But now we have a let-out. A totally ridiculous legal precedent might just save your bacon. This happened too many years ago for me to count. A couple of property developers bought a house and turned it into flats for sale. Unfortunately for them the price of houses fell dramatically while they were doing this and they made a loss on their venture. "Oh dear, how sad, never mind" I here you all say. "Another pay of money grubbing yuppies come unstuck". Oh no; not these two. They sued the bank that had lent them the money with which to buy the house and they won!

 

[kendor]

Interesting Felix , do you have more info on the case and the precedent that won them the case?

 

[pipme]

 

[masona]

They sued the bank that had lent them the money with which to buy the house and they won!

In some way I'm glad to hear this because Bank are lending far too much and couldn't careless if you can't afford the repayment. The Bank should see what your're investing in to give a good sound advice which you don't get because they are greedy.

 

[Killemall]

If you mortgage yourself up to the hilt there is always a risk that your income will not rise fast enough to keep up with rising interest rates. There is also a risk that the house you bought was overpriced in the true bricks and mortar sense rather than by the estate agents maxim "a house is worth what somebody is prepared to pay for it". This can leave you with a house you can't afford to keep but also can't afford to sell.

But now we have a let-out. A totally ridiculous legal precedent might just save your bacon. This happened too many years ago for me to count. A couple of property developers bought a house and turned it into flats for sale. Unfortunately for them the price of houses fell dramatically while they were doing this and they made a loss on their venture. "Oh dear, how sad, never mind" I here you all say. "Another pay of money grubbing yuppies come unstuck". Oh no; not these two. They sued the bank that had lent them the money with which to buy the house and they won!

Yes, and why shouldn't the banks or any other lender share some of the responsibility? Afterall, they too are, to use your words, 'money grubbing' as they not just lending money, but rather investing in the project. It falls into the same category as endowment mortgages. People were sold these with the knowledge that not only would it pay off their mortgages, but also give them a nice lump sum. What utter b*****ks that was, with many people falling short of the basic amount to pay their debts. I wonder if these people could all get together and register themselves as a third world country. That way, the government will feel sorry for them and wipe their debt out.

 

[felix]

Sorry kendor. I can't remember any more reliable details. I think they bought a house in London during the 80's. It was a time when lots of people were buying property with the intention of selling quickly at a profit and something in the old memory bank is saying Barclays.

At about the same time, some victims of a very large bombing in the US were trying to sue ICI for selling ammonium nitrate to the bombers. That might help you pin the date down.

 

[petewood]

Howard and Letwin?