Thursday 30 September 2010

Not sure whether to laugh or cry...

From The Shields Gazette:

The last Government calculated a general mortgage interest rate for the [subsidy for mortgage interest for low income households], based on the Bank of England's base rate, plus one per cent. This was fixed when the base rate was high and stands at 6.08 per cent. But because the base rate has since plummeted to 0.5 per cent, the Government is lowering the [Support for Mortgage Interest] to 3.63%. The Department of Work and Pensions said the SMI was never intended to pay off any of the capital, just the mortgage interest.

A 78-year-old, from South Shields, who does not wish to be named, is now worried she'll lose her home. She said: "I haven't dared work out how much extra money I will have to pay just yet – I'm scared to. I only got the letter on Tuesday, saying what was happening, everything is going so quick.

"I don't know where they expect me to get the extra cash from, I'm cutting it fine as it is with my pension payments. I really am concerned that I'm going to end up losing my home. It's not as if anyone will want to employ someone of my age."


She's 78 and she still has a mortgage? Or did she take out a second mortgage very late in life?

1 comments:

formertory said...

Of course the article doesn't exactly flesh out the type of mortgage or the interest rate, or the terms of repayment (capital-and-interest? Interest only lifetime mortgage?) so it's difficult to know what's really going on.

There's a large and growing number of people reaching retirement (age) with a mortgage outstanding. And a load more who get there with unsecured debt who then want raise capital by mortgage to consolidate. Some go roll-up equity release (no monthly payments) and some go interest-only.

Any adviser who starts looking to replace unsecured debt with secured debt needs to be (a) extremely careful to explain risk and (b) kicked all the way to Timbuktoo and back if they do it for a pensioner or near-pensioner, but there are always those who'll do it for the commission or for the fee they can extort from people who realised too late that they're in the brown malodorous stuff, and are burning with shame at the prospect of being taken to Court - they'll take any short-term fix to avoid it, by and large.

Even those who might have been expected to know better have got caught up in the credit expansion wave.