Calling all you Crackpot Capitalists

[TheBigShort]

Only if you're an idiot who can't save

I think the point is, that if you are paying for a mortgage beyond retirement, it makes it harder to save.
Nothing idiotic about it all, just simple math.

This is poor financial behaviour. Nothing more than that.

Yes it is I agree. I guesstimate that most people make the decision to take out a mortgage once, maybe twice or three times max in their lifetimes.
On the other hand, banks issue mortgages to thousands of people week in week out.
So if it's poor financial behaviour on the part of the borrower, then it is nothing short of idiocy to the point of reckless criminality on the part of the lender.

There's no gun to anyone's head forcing them to be paying off a mortgage into retirement.

Not literary. But if they don't keep up payments they could lose their home. Probably added to the housing waiting list.

 

[The Horseman]

Yes it is I agree. I guesstimate that most people make the decision to take out a mortgage once, maybe twice or three times max in their lifetimes.
On the other hand, banks issue mortgages to thousands of people week in week out.
So if it's poor financial behaviour on the part of the borrower, then it is nothing short of idiocy to the point of reckless criminality on the part of the lender.

At the end of the day it is a contract between two parties, the borrower should do there own due diligence.

 

[TheBigShort]

Our bank allowed us to borrow beyond our retirement ages. They didn't force us to, they simply facilitated it, subject to us having pension schemes in place (with resulting pension income post retirement age). I don't believe that's reckless or them putting a gun to our heads. In reality, we will clear the mortgage down before then, but even if we don't, our retirement lump sums would kill it off.

That's terrific, and I'm sure it will all work out well for you in the end.
Our bank also offered us a mortgage beyond retirement age. It was very tempting, but we sat down and did the numbers. It was simply unsustainable, considering we have two boys that will, hopefully go on to college.
In the end, we had to consider why a bank be offering these unsustainable loan?

 

[Gordon Gekko]

How is it unsustainable?

 

[Firefly]

Closer to home.

The centralised command banking economy, purporting to be a capitalist system, is ensuring that ever increasing debt will follow us to the grave

http://www.rte.ie/amp/906728/

Link please?

 

[PGF2016]

That's terrific, and I'm sure it will all work out well for you in the end.
Our bank also offered us a mortgage beyond retirement age. It was very tempting, but we sat down and did the numbers. It was simply unsustainable, considering we have two boys that will, hopefully go on to college.
In the end, we had to consider why a bank be offering these unsustainable loan?

Maybe the bank thinks you'll honour your debt. You're the idiot if you take on the loan and in the knowledge that you won't be able to afford it as you'll have to pay for the education of your boys. Again not the bank's fault but your own.

 

[Gordon Gekko]

The bank (UB in this case) looked for details of the underlying pension schemes.

Lending to people who will have meaningful tax-free lump sums and pension income post-65; whatever is the world coming to!

 

[TheBigShort]

Maybe the bank thinks you'll honour your debt. You're the idiot if you take on the loan and in the knowledge that you won't be able to afford it as you'll have to pay for the education of your boys. Again not the bank's fault but your own.

Firstly, we didnt take on the loan.
Secondly, do you think it's a good idea to have a banking system peddling loans in such an unsustainable manner?
Do you think it's a good idea that someone like myself, without a financial background, can conclude that the mortgage offer made to me was unsustainable, but that a bank (supposedly experts in the field of finance) cannot figure that out?

 

[Gordon Gekko]

Firstly, we didnt take on the loan.
Secondly, do you think it's a good idea to have a banking system peddling loans in such an unsustainable manner?
Do you think it's a good idea that someone like myself, without a financial background, can conclude that the mortgage offer made to me was unsustainable, but that a bank (supposedly experts in the field of finance) cannot figure that out?

Why is such a loan unsustainable?

I've direct experience of this and the bank wanted full details of the relevant pension schemes.

It's actually sensible lending; a bank getting under the bonnet and understanding its customers.

 

[The Horseman]

Firstly, we take on the loan.
Secondly, do you think it's a good idea to have a banking system peddling loans in such an unsustainable manner?
Do you think it's a good idea that someone like myself, without a financial background, can conclude that the mortgage offer made to me was unsustainable, but that a bank (supposedly experts in the field of finance) cannot figure that out?

If the bank advise you that you can't afford the loan you will complain you are not allowed make your own decision. Currently we have the loan to income scheme via the Central bank and people are complaining it is to strict. We as a people are not capable of making correct decisions (because there appears to be no consequences of same). I would reference the difficulty in repossessing houses.

What if after you have paid off your mortgage and the house is worth more than the mortgage, should the bank be entitled to a share in the increase?

At the end of the day a mortgage is a commercial transaction between you and the bank. if you can't honour it then you have to live with the consequences.

 

[Firefly]

I guesstimate that most people make the decision to take out a mortgage once, maybe twice or three times max in their lifetimes.
On the other hand, banks issue mortgages to thousands of people week in week out.
So if it's poor financial behaviour on the part of the borrower, then it is nothing short of idiocy to the point of reckless criminality on the part of the lender.

I see it the other way around. For the borrower it is a massive decision that should be really thought through. In addition, the borrower knows vastly more information than the lender. As you say, the lender issues thousands of mortgage. It has imperfect information and can not feasibly know everything about every applicant and so has to rely on standard checks. I am not for a minute saying the lender has no responsibility for this, but the borrower knows far more about their ability to pay.

 

[TheBigShort]

For the borrower it is a massive decision that should be really thought through.

Yes it should. But without a financial background, is it advisable to seek financial advice? Where would one get financial advice? From the financial sector perhaps? Would that include mortgage lenders?

In addition, the borrower knows vastly more information than the lender

Such as? The lender will typically ask a series of questions about your income, your dependents, age, etc and make its decision on this. If they need more information what would it be?

It has imperfect information and can not feasibly know everything about every applicant and so has to rely on standard checks. I am not for a minute saying the lender has no responsibility for this, but the borrower knows far more about their ability to pay.

If you micro analysis every applicant, I agree, it is not feasible. But that's why we have have 'big picture' data also, such as personal debt levels etc. So if a stat emerges that shows that nearly half of borrowers are borrowing into retirement for their mortgage that should make some people sit up. yes?/no?
Now if those borrowers have substantial lump-sum pension arrangements made then maybe its not such an issue after all. But if the big picture data also tells us that less than half of workers have a pension, that public service pension payments are a ticking time-bomb, then combining all these things, it paints a worrying picture for the future in my opinion. Including for those that think their lump-sum pension will be waiting for them for when they retire, guaranteed!

 

[PGF2016]

Firstly, we didnt take on the loan.

Yes. You said as much already.

Secondly, do you think it's a good idea to have a banking system peddling loans in such an unsustainable manner?
Do you think it's a good idea that someone like myself, without a financial background, can conclude that the mortgage offer made to me was unsustainable, but that a bank (supposedly experts in the field of finance) cannot figure that out?

The bank doesn't know and can't know that you're going to take on an extra burden later that will make the loan unsustainable. It's up to the person taking the loan. Don't blame the banks for something that is not within their control.

 

[The Horseman]

Yes it should. But without a financial background, is it advisable to seek financial advice? Where would one get financial advice? From the financial sector perhaps? Would that include mortgage lenders?



What about independent financial advise?

 

[TheBigShort]

The bank doesn't know and can't know that you're going to take on an extra burden later that will make the loan unsustainable

What extra burden are you talking about? Is that a mortgage top-up, a brand new mortgage, credit card debt, a car loan, a holiday loan?
Are you seriously suggesting that banks aren't aware of additional financial obligations? Are you seriously suggesting that the headline posted above relates only to people who took out one mortgage and one mortgage only?
It is not, it relates to the fact that more and more people are borrowing larger and larger and amounts. This includes borrowing on top of existing debt, that is why, the stats are showing that more and more people will be paying off their mortgages well into retirement.

On an individual basis, for someone like your self, no problem.
But on a national basis, do you think this is a financially sound system?
Do you think the risks of default are increasing, and would that concern you if they were?

"Simon Hoffman, pensions and investments director with Friends First, said a combination of the scale of mortgage debt, income pressure and the fact that people are getting on the housing ladder later in life may be the reason for this scenario. Mr Hoffman said problems may arise when the financial burden of a mortgage along with planning for retirement - two of the biggest financial assets that anyone can have - start to clash."

 

[Firefly]

The bank doesn't know and can't know that you're going to take on an extra burden later that will make the loan unsustainable. It's up to the person taking the loan. Don't blame the banks for something that is not within their control.

Don't be silly. Why should there be any personal responsibility for the poor financially illiterate, naive borrower ? It's all the bank's fault don't you know.

 

[TheBigShort]

Why should there be any personal responsibility for the poor financially illiterate, naive borrower

Or the poor financially illiterate, naïve lender?

 

[PGF2016]

What extra burden are you talking about? Is that a mortgage top-up, a brand new mortgage, credit card debt, a car loan, a holiday loan?
Are you seriously suggesting that banks aren't aware of additional financial obligations? Are you seriously suggesting that the headline posted above relates only to people who took out one mortgage and one mortgage only?
It is not, it relates to the fact that more and more people are borrowing larger and larger and amounts. This includes borrowing on top of existing debt, that is why, the stats are showing that more and more people will be paying off their mortgages well into retirement.

On an individual basis, for someone like your self, no problem.
But on a national basis, do you think this is a financially sound system?
Do you think the risks of default are increasing, and would that concern you if they were?

"Simon Hoffman, pensions and investments director with Friends First, said a combination of the scale of mortgage debt, income pressure and the fact that people are getting on the housing ladder later in life may be the reason for this scenario. Mr Hoffman said problems may arise when the financial burden of a mortgage along with planning for retirement - two of the biggest financial assets that anyone can have - start to clash."

My response was in reply to your previous comment about the loan that you were considering (as you well know). The extra burden was the college fees. Banks are perfectly aware of additional obligations. Where did I suggest otherwise?

Is this a sound system? It could be if only those with the ability to repay are offered loans. I would defer to the banks actuaries to decide if the risks of default are increasing.

 

[TheBigShort]

My response was in reply to your previous comment about the loan that you were considering (as you well know). The extra burden was the college fees. Banks are perfectly aware of additional obligations. Where did I suggest otherwise?

Fair enough, but earlier you said;

The bank doesn't know and can't know that you're going to take on an extra burden later that will make the loan unsustainable

So I take out at 30yr mortgage at 30yrs of age. Ten years in, I need/want to buy a new car. Ten more years, college fees arrive. I support all of this through additional loans and re-mortgaging to the extent that my mortgage repayments will continue past age 66. This is income that I cannot put away for a pension. That is my responsibility. If I default, my fault.
But if my personal circumstance is reflected in a large body of the working population, do you consider that banks have, in their capacity as 'expert financiers', any responsibility if defaults are to increase putting the banks balance sheets in jeopardy?

 

[PGF2016]

Fair enough, but earlier you said;



So I take out at 30yr mortgage at 30yrs of age. Ten years in, I need/want to buy a new car. Ten more years, college fees arrive. I support all of this through additional loans and re-mortgaging to the extent that my mortgage repayments will continue past age 66. This is income that I cannot put away for a pension. That is my responsibility. If I default, my fault.
But if my personal circumstance is reflected in a large body of the working population, do you consider that banks have, in their capacity as 'expert financiers', any responsibility if defaults are to increase putting the banks balance sheets in jeopardy?

Let me update what I previously said:
Banks are perfectly aware of additional obligations... but can't 100% predict the future (and neither can the person taking the loan). There is an onus on the person taking the loan to understand their future plans where possible and to ensure they don't get themselves into a financial pickle.