Reaching the end of an interest-only mortgage and facing a shortfall you have no way of paying off can be extremely distressing.
I know because my family has had to deal with this horrible situation over the past few years.
For anyone on a low income, defusing one of these interest- only time bombs isn’t simple.
Just ask Len and Val Fitzgerald, who, at 76, face being turfed out of their Eastbourne home.
Shattered dreams: Len and Val Fitzgerald, who, at 76, face being turfed out of their Eastbourne home
Their bank, Santander, seems to think they can just sell up and downsize. But, as Len and Val explain on Page 45, they have painstakingly prepared their house for retirement, installing a new toilet and windows.
As well as the torment of seeing their hard work undone, they will be torn from neighbours who are a lifeline in emergencies — and may have to give up their dog, Millie.
The Fitzgeralds’ story is one of the saddest Money Mail has heard. But many older borrowers with interest-only loans face the same harsh reality: if they sell, they will have to hand a massive chunk of the proceeds to the bank.
In many instances, that will leave barely enough to buy another home. In Len and Val’s case, they’ll have only £80,000 left, meaning they’ll have to rent.
Banks try to paint the interest-only crisis as a picture of irresponsible borrowers who bit off more than they could chew. And, in some cases, borrowers have buried their heads in the sand.
But the banks cannot absolve themselves of all blame. They handed out credit like confetti in the boom years. And now, they’re failing to help the customers they treated as cash cows.
Jonathan Davidson, supervision chief at City watchdog the Financial Conduct Authority, says tackling these loans at your bank can be ‘tortuous’ and at least one lender has ‘no means’ of calling back customers who ask for help.
The banks’ worst sin, though, is the arbitrary age limits they have introduced.
Every borrower understands if you can’t pay your mortgage, your home is repossessed.
I see no good reason — as long as you’re coughing up each month — why you shouldn’t take a mortgage to the grave. The debt can be repaid from sale proceeds when you die and, in the meantime, the bank keeps collecting interest. It’s a win-win for banks and customers like the Fitzgeralds.
But, sadly, most firms haven’t been brave enough to use their common sense and launch these types of deals.
Save a few bob
Hate the thought of the taxman grabbing a slice of the wealth you leave behind for your relatives? Now, you can influence the way inheritance taxes are charged.
The Office of Tax Simplification has been asked by the Government to carry out a major review, and its tax director, Paul Morton, wants the public’s verdict.
Tell him what you think at www.gov.uk/ots. The survey takes ten minutes (and you could save yourself a few bob if Mr Morton likes what you say).
Thank you for supporting my crusade against the discrimination faced by people who refuse to plug in to the internet.
A point eloquently raised by Vivienne Murphy, of Coventry, is that companies now seem to give only web addresses as points of contact. ‘We are the silent brigade who no one mentions,’ she says. ‘Maybe millions of us of a certain age are thinking how are we going to manage our future?’
From the letters I’ve been getting, Vivienne, you are not alone.
I Don’t mean to end on a downer, but a warning sent to me by Jenny Dunn, of Gloucester, is too important to ignore.
Her granddaughter had an email from the DVLA about a car tax refund. She called the number and the man on the phone asked for bank details.
‘Realising it could be a scam, she notified her bank, who failed to protect her account,’ says Jenny.
The £11,000 she lost was left by her late father, who had died a month before. ‘The money had been in her account barely a week.’
These crooks have no morals and no shame. Please, never give bank details to a stranger.