There is not an awful lot of sympathy towards people who are left with interest-only mortgages in retirement.
The attitude from many seems to be: “Serves them right. They were living in the never-never.”
During the next nine years 1.3m interest-only loans, worth £111bn, will come to the end of their term – and a substantial number of these borrowers will have no way to repay the outstanding capital.
Today the Financial Conduct Authority will publish its report in to interest-only loans. While the figures contained in this document are likely to be stark, I get the feeling it will take a very cautious tone. There is likely to be lots of talk about regulators and lenders working together to help those left with loans they cannot pay off.
And so they should. No one wants to kick a pensioner out of his home, and a little bit of leniency and help will go a long way.
Certainly some borrowers were living in dreamland. Many were banking on inheritance or a gift from a loved one, both of which failed to materialise.
Others planned to move to repayment deals. For them life got in the way; perhaps they planned to switch after three or four years, but then got married and along came kids, then they needed a bigger house.
In reality only 6 per cent ever move to repayment. It is easy to point a finger of blame.
But time and again, these borrowers remortgaged and on each occasion no broker or lender warned them that they were heading for disaster.
The interest-only crisis is the crippling legacy of Gordon Brown. He oversaw the credit binge that led to millions being approved loans they should simply never have been given. More than 50 per cent of mortgages handed out in 2007 and 2008 were granted without a lender asking for proof of income.
Up to 45 per cent of those who have borrowed in the past eight years are effectively prisoners in their own homes.
Even on historically low interest rates one in five borrowers is struggling.
A senior person at the FSA once asked me what I thought about the prospect of claims handlers chasing interest-only mortgage mis-selling cases.
I told them I thought it was unlikely, and that it was something that was simply being drummed up for a bit of extra business.
It was only when I first saw the mortgage market review in 2012 that I realised this was a loaded question. They knew the figures from that report laid bare the stark fact that millions of homeowners were convinced to take loans they simply could not afford to ever pay back. Either a mass hysteria had set in or something broke in the industry.
Lenders’ patience is really going to be stretched to the edge of tolerance to ensure the interest-only crisis does not turn in to a claims handler’s dream.
Lenders’ patience is really going to be stretched to the edge of tolerance to ensure the interest-only crisis does not become a claims handler’s dream.Managing many pension pots
When I first became a journalist I was keen to move up the career ladder quickly. As a result, in a matter of a few years I moved jobs a lot and acquired four pensions.
Two of these still exist – and at various stages I tried to transfer them in to new schemes – but with no luck.
I have also worked twice for the same employer and, annoyingly, have separate pots for them.
One pension does not exist any more. The scheme once sent me a letter – long before I wrote about personal finance – saying that unless I gave them specific instructions, my contributions would be refunded. Obviously, the firm’s contributions and reasonable costs would be deducted from that pot.
I did not really know what to do and foolishly dilly-dallied, until one day a cheque for a few hundred pounds arrived. The money simply disappeared once it hit my bank account.
I suspect this is a pretty typical scenario, particularly since the days of people having one job for life are now gone.
Automatic transfers are the solution to this mess and should mean savers, even the not particularly diligent ones, are given the chance of having their contributions accrue value for longer.
Only way is up... for property
It is very hard to see any other direction for the property market other than up.
The Budget’s Help to Buy and mortgage guarantee schemes are enough to create a bubble as it is.
And now the Bank of England is to allow buy-to-let specialists access to Funding for Lending – giving them access to cheap cash. It will be boom time for landlords. And with all that demand there is only one way prices can go – up.
James Coney is editor of Money Mail at the Daily Mail
