We are all tempted to blame somebody else for our misfortunes sometimes. In Britain, pointing fingers at others for what you have done however has become a bit of a national sport when it comes to financial services. 'It's the bank's fault!' is something you hear almost every day on the news.
Now, those house owners who took out interest only mortgages in the boom years have somebody else to blame again for their problems: the mortgage lenders. A report for the FCA (the successor to the FSA) highlights the ticking time bomb on which some people are sitting as their interest only mortgage will mature over the next decade.
There is no doubt that mortgage lenders when giving knowingly false information to customers should be penalised and their clients compensated. The BBC Today programme this morning however struggled to find people who were genuinely duped into taking out interest only mortgages. In the programme, the most likely reasons people offered why they had opted for interest only mortgages were 'I didnt know what they were' or 'It seemed a good idea'.
That seems to reflect a mind gobbling ignorance on the part of the customers when taking out interest only mortgages rather than systematic failures of mortgage lenders. Yet, ignorance is no useful defence in financial matters. People have a responsibility to understand what they are signing. It seems to me that taking out an interest only mortgage to the tune of £188,000 when you have an income of about £40,000 is either reckless or plain stupid. It looks like this is not so much a case of evil financial advisers tricking people into signing things, but a case of 'I can't be bothered to think about it before I sign'.
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