Houses built on sand
BANKS and building societies are desperate to play down the notion of an interest-only timebomb.
The last thing they want us all to think is that thousands of homeowners who have never missed a mortgage repayment may suddenly be forced out of their family home because for the past 20 years banks have lent money irresponsibly.
Well, I’ve news for them: that ship has already sailed.
As our story on Pages 38-43 reveals, there are hundreds of thousands of homeowners whose interest- only loans are maturing in the next few years, and they are wondering why there were so few warnings from the banks about their mortgages.
They have told how they loyally repaid their loans and often remortgaged time and again, but no one questioned how they would pay back the capital on their loans. Some thought property price rises were the answer, others banked on an inheritance that never materialised.
Many are being forced to sell their family home to buy elsewhere or even rent.
It takes only a glance at industry data to see the scale of the problem. Before 1993, there are no figures on how those who took interest-only loans planned to repay them. Even after this was collected, many banks still never bothered to ask.
There are homebuyers who were complicit in the banks’ irresponsible behaviour. Some failed to heed warnings their endowment would fail to pay out, others who were mis-sold endowments blew the redress they had won on holidays, and of the few who were warned, some ignored the advice because of a belief that house prices would keep rising.
They never fully thought through how they would tap into the equity built up in their home.
Some homeowners do realise the scale of the problem. They have wanted to save more, but can’t.
Many first-time buyers who took interest- only as a way of cutting monthly bills soon forgot they intended to move to repayment when they next remortgaged.
life can get in the way, whether it’s getting married, having children, losing a job: there’s always a plausible reason why you never get round to planning to pay off the mortgage.
Many interest-only borrowers were victims of over-confident, commission-hungry bank advisers who believed the mortgage boom would last indefinitely.
Today, the banks have realised the error of their ways. New rules on interest-only loans have forced them to demand bigger deposits and proof that homeowners are saving.
But it’s not them who will struggle with this crackdown. It’s ordinary homeowners who will find themselves stuck with an expensive mortgage deal, unable to save more and facing the painful prospect of losing the home they thought they would spend the rest of their lives in.
Talktalk farce
HAVING been Money Mail editor for 12 years, and now as our financial agony uncle, Tony Hazell is used to dealing with shoddy customer service. But even he reckoned without the dazzling incompetence of Talktalk — the firm that has won our Wooden Spoon award for diabolical service two years running.
After being offered its new superfast fibre-optic broadband, Tony has spent weeks with an internet connection boasting the speed of a drunken slug. He’s been able to make cups of tea in the time it takes to send an email, and begun cooking family meals while waiting for an internet search to load.
At times the connection has dropped out for two hours.
He emailed and was told to expect a call in 24 hours, only to get this reply seven days later: ‘You are unauthorised user of this account (sic).’
He’s called the company phone line, only to find himself, after much button-pressing, talking to an overseas call centre employee who insisted on reading from a script.
His internet was even declared working — when it wasn’t.
The problem was fixed only after Tony sought help from one of his contacts at the phone firm.
At Money Mail we use contacts at big businesses to solve personal issues only as a last resort — because we know readers can’t.
Our experience helps us understand your problems. And in the case of Talktalk it’s clear its service is not improving.
Having promised to make things better — things aren’t. It will come as no surprise if Talktalk wins our Wooden Spoon again this year.
When Brazil won the football World cup for the third time, they got to keep the trophy.
If Talktalk matches this feat, we may just let the company keep the Wooden Spoon so we can rename our gong the Talktalk Award For Terrible customer Service.