Surely they shouldn't be allowed to take them out unless they can prove they can afford to save to repay the capital.

I can smell another myself misselling scandal. 'you sold me that mortgage knowing I couldn't afford it'.
I.e. more people blaming the banks for their own greed and stupidity.

Well the housing market would have stalled a lot earlier if people had to be realistic. They should never have been sold anyway. Ever since banks got involved in mortgage lending they have created bubbles. Mortgages should only be simple repayment types and nothing fancier. It was the fancy mortgages that lead to serious problems in Iceland and Eastern Europe. Yes this should be treated as mis-selling, but then everyone thought that housing was a one way bet so these mortgages would be sold as low risk. It is the same for pension mortgages. The investment returns have proved to be ineffective to cover the mortgage capital. As these people are forced to sell then they will drive down house prices.

I was offered an interest-only mortgage when I took mine out - which is a good few years ago now. The sell was I would probably end up with a lump sum at the end of it as well as a house. It was patently obvious to me that an interest only mortgage was basically a gamble, relying on return on investment for the money you're investing to pay off the capital being higher than required to pay off the capital at the end. Even as a relatively lay economist, I could see there was no way that could be guaranteed over the period of the loan. They were suggesting something that it was not within their (or my) ability to control. I told them to stuff it and got a standard repayment mortgage instead. I know...3 people who have got to the end of interest only mortgages and they've all had a shortfall to make up at the end. One was over 10 grand.

I'm not sure if there's any case for mis-selling involved per se - everything they said was feasible but I just didn't think it was that likely and they did at least say that the possibility of a shortfall existed - but it was certainly a case of.. emphasising the positives. TBH, I do have some sympathy butI'm also thinking 'more fool you', frankly.

if we're talking about people who have taken out interest only mortgages and not saved anything at all to pay off the capital - relying on the fact they can either sell the house when the debt becomes due for more than the value of the capital required and move on to a new house using the difference as a deposit or then take out a new mortgage - then frankly I've no sympathy at all. You don't get something for nothing.

And that's the way it should have been. The housing market grew to seriously unrealistic levels.

Why the past tense? Our friend George is doing all sorts of things to try to keep the balloon inflated. Of course he's making a mess of it but that's probably something we can take as read.

Reminds me of when endowment mortgages were popular. Some people did very well out of them, but others didn't.

I don't believe in gambling, so I took out a capped rate repayment mortgage. The safest option because the only gamble was that my salary wasn't going to decrease significantly.

This. Anyone who takes a bet on the roof over their head is a fool.

I find it strange that people do their maths (for loans or mortgages) based on their house going up in value.
You always need somewhere to live. You can only unlock that value if you still the house and downsize.

If your going to buy a house the first thing is make sure you can afford it and at the end of your repayment schedule you own it.
If you dont hard [LIFTED] cheese. Your a total feckwit and frankly deserve to lose it.

It seems to depend on the lender as much as anything. I worked mortgages for 3 years for Nationwide and I was surprised by the number of people who hadn't already planned for the repayment of the capital at the end of the term. Quite a lot of people didn't have any proof that they had anything in place for the repayment and said that companies like the Halifax were prepared to give them a mortgage based soley on their word! Nationwide was quite a low risk lender, but at the time I was taken aback. My parents had an interest only mortgage and an endowment to cover the entire capital repayment at the term of the mortgage, they were lucky and the endowment matured early so they paid off their mortgage 3 years early and saved themselves a lot of interest.

If you can't afford a repayment mortgage, then you can't afford a mortgage IMO.
We budgeted for what we could afford, allowing for a slight increase in interest rates at the end of our fixed rate deal.
That was well under what the banks were prepared to lend us. We borrowed £126k. The banks were offereing between £160k and 190k.

I see that slightly differently. You're commited to the endowment so the bank has proof that you're making provisions to pay it back.

If it's the case, maybe the prices of housing will go down? ====> of course it won't, the government will bail everybody out and people who saved instead of gamble will be stuffed again.

I'm not so sure. For one thing, house prices are already going down. Way down on what they were 5 years ago.