They were originally sold as part of a pension mortgage in the mid eighties and with endowment linked savings but they were turning sour over the last decade as endowment returns failed to live up to expectations, (another mis-selling scandal?) and so many were forced to up endowment payments, substantially. Pension mortgages were in a similar position. Though the thought of providing for a pension and finding that it barely covers the mortgage will be like a kick in the teeth for many. By the end of the nineties these products were in trouble because of the stock market crash. In hindsight they were going to explode on the public and really should never have been allowed. Repayment mortgages are the only ones that should be allowed, and with tough salary multiples. The problem is that the owners of these mortgages are in trouble and will not be able to refinance.

I wonder will that be remembered come the time...

It is a problem now. If the property market has a 15 year slump, which is possible, then those with interest only mortgages will be in trouble. I fully expect a 30 or even 40% drop over the next five years and that will push nearly all into negative equity. They were originally sold so that people could take advantage of property inflation to build up some equity then switch to a repayment mortgage. If there is no long term appreciation then they will have problems. They will not be able to build enough equity to refinance, and with negative equity which is increasing they will either be forced to sell or will be foreclosed on.

I've never really understood why people go for interest only. Always had a repayment mortgage.

The advantage of interest only mortgages was that the repayments were lower, and give the borrower room to move. It has a serious drawback when property prices are stable or worse falling. Though many never thought that property would fall.

How wrong they were. What goes up must come down. Think that's the only thing I learnt when working in the Financial sector.

While I always have had a replayment mortgage for the reasons expressed earlier property has alays had an upwards trend over the longer term. yes there have been ups and downs (Mid 70's, Late 80's and of course now) but property has a limited supply and a lrage demand.

Personally unless the resession returns I think prices will only fall a little before stabalising

Its amazing that you never hear an estate agent say that house prices can go down.


The recession is back thanks to government policy and it will mean prices will fall substantially or we will have a very long stagnation in prices while debt levels come down. US home prices are falling again because of debt over hang and the UK has even more private debt than the US so it has to fall.

Absolutely. All these people that bought for short term profit will suffer. I don't intend on moving any time soon. Had my house 11 years now and although I have looked to see what's around I think I would have a really hard time buying something better. My ultimate goal is to retire in the next 5 / 10 years (from the London ratrace, I will probably do some kind of work) and move to the coast or abroad.



Very true. It seems houses in my area have not gone down loads. Although I've been looking at 'for sale' prices and not the actual sale price. I guess I won't really know until I try and sell my place.



I think it's going to be a while before we're out of the recession too

It will probably be a long shallow recession, though tell that to the Irish who have been in recession for a couple of years thanks to austerity measures.

is it? The last two quarters published showed growth (0.1 and 1.1 according to the ONS) and I'm sure you had to have two consecutive quarters with a negative growth in GDP to be in a recession.

Spoken like a true homeowner!

Last time they put the interest rates up (18 months?) or so ago, the prices began to tumble. However the BofE backtracked, then kept interest rates artificially low to keep the property market from collapsing.

The issue we have at the moment is that property is overpriced, but those who currently have mortgages are able to hang on as they can just about afford their repayments. This is only possible by the BofE keeping rates artificially low. This causes its own problems, however, so how long it can go on for is anybody's guess.

As someone who missed the ladder last time round and who has been well and truly priced out as a result, I welcome a correction.

I agree with that. I feel for anyone that's not on the property ladder yet. I was lucky to get family help and bought first place at 21 - 20 years ago. No way could I afford to buy now.

Because I've been in my house so long my mortgage is approximately 50% less than the value of the property. If anything did happen and I couldn't afford mortgage or property prices fell I hope I'd be in a good position to sell easily but you don't know until it happens.

OK, this is my first venture into the money thread but I've been stressed recently so I thought I'd see what you guys think.

PART 1
======
A few friends have just sent an email around saying they are thinking of planning a skiing holiday for early on next year. WOO!

I have a share save thing at work which has been going for a year (£75 a month) and it matures after 3 years (another 2 to go).

I was thinking I could use the money that's saved in there to fund the holiday (and cancel the share save thing).

PART 2
======
I have a loan that I got 2 years ago (ish). I got the loan over the longest time possible and if I keep going at the current rate (£115 a month) I'll be paying it for about the next 3 years. I've got about 3 grand left on it.

I always intended to pay it off more quickly but so far I have only put a couple of extra payments in and the loan allows extra payments at no extra cost.

PART 3
======
I'm living in a house share at the moment which is very cheap for the area I'm living in and, whilst it works as a house, I'm really beginning to want to live in my own space.

However, having looked around, a nice (ish) one bedroomed flat in the area is going to cost around £200-£250 a month more than what I'm currently paying (incl. bills).

THE POINT
=========
Seeing as I was willing to put my savings into this holiday, what do you think to the idea of sinking it into my loan and then paying a standing order straight into my loan each month of the £75 I was previously saving.

If I was to do this (and I really mean do it) I could have the loan paid off by this time next year instead of March 2013. Also I may even be able to stick some extra money in to reduce it further. March or April next year at a push.

Once that's done I have then freed up the extra money and can put it to use for getting a nice flat or something. OK, I don't get a skiing holiday but I think it's a fairly small sacrifice? I may even be able to buy my own place after that.

What do you guys think?

Is there any penalty for stopping the work save scheme?