PPI – the mis selling of ‘payment protection insurance’ – “PPI was mis-sold and complaints about it mishandled on an industrial scale for well over a decade.” With this mis-selling being carried out by not only the banks or providers, but also by third party brokers. One major High Street bank sold almost ÂŁ400m of PPI with their financial products, making a gross profit margin of 80%. – Wikipedia.
The banks have had to put billions aside to pay for this mistake. But what about ‘Interest only’ mortgage products? Did they advise well enough on the sale, or even the vehicle of repayment? After all just paying the interest only does leave a gap at the end.
The UKFI seems to think it’s a problem as can be seen here on thisismoney.co.uk.
I suppose this article is referencing those that have their home mortaged on an interest only mortgage. Some may have even changed from a repayment to IO to lower the cost of living in the last few years. However, what about BTL mortgages – let’s face it most of them are IO. Does this mean that they have all been potentially mis sold?
In one hand it would be a handy exit for those that have not worked their exit out. However, what about the mess it would would leave behind if the banks get punished, could they see it through! Not so sure.
Also what will happen with in the next decade when most of the early IO mortgages come to an end? Will the banks offer new ones (mortgage) or will they force a sale, at potential loss, and leave the mortgagee to fund the difference as another loan?
After all those that have not worked out an exit plan will probably have to give the property to the bank, get another mortgage or force a sale. Either way there will be a problem.
One thing is for sure the PRS in this country is destined for change and this dilemma will be part of it. With capital growth a almost 0 this is a ticking time bomb.
