Interest Only Mortgages . This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service. With interest-only mortgages, you only pay off the interest on the amount you borrow. So plan now. Back in 2013 the FCA also identified three residential interest-only mortgage maturity peaks. Find out how much income you keep and how much the taxman takes. This analysis predicts that in 2019, 81,400 interest-only deals worth £9.2bn would be due to mature, and a further 82,100 worth £9.7bn would mature in 2020. Compare Travel Money. An offset mortgage is one where you can use any existing savings you have as effective overpayments or contributions towards your mortgage balance, with interest only being payable on the remainder. Always remember anyone can post on the MSE forums, so it can be very different from our opinion. Mortgages can be complicated, and with the range of options out there it can be difficult to know which mortgage is right for you. The financial journalist has been invaluable to many people, especially during the ongoing COVID-19 pandemic. Money saving expert Martin Lewis offers advice on PPI People will be able to claim under Plevin, if they were not mis-sold PPI but the commission the lender received was more than 50 per cent. Appearing on ITV tonight, Martin discussed the matter of interest rates, with the situation looking dire for savers. When you get an interest-only mortgage, you’ll just pay the interest at a fixed rate for a fixed amount of time, giving you a lower payment than a more traditional mortgage on the same loan amount. Again, see our. Compare by whichever criteria matter most to you, including max LTV, interest rates, and fees. How much should you be saving for your kids to go to uni? As part of its latest review into the issue the FCA looked at 10 lenders, which represent around 60% of the interest-only residential mortgage market, to see how they are helping customers to ensure their mortgages will be paid off. If your chosen plan is to sell your home, even if the value is larger than the mortgage, you need some legroom in case the value drops. However, your mortgage lender must be the same bank as your savings account holder to take out an offset mortgage. the money you’ve borrowed to buy the property, at the end of the mortgage … Referred to as retirement mortgages, they have been a big hit with older borrowers who, like you, need to raise cash to pay back a standard interest-only mortgage at the end of its term. Including can you reschedule, what do insurers cover and will you get a refund? CML figures show in 2009, 14% of homeowners took an interest-only mortgage with no repayment plan specified, compared to 21% in 2008. Or you could switch to a repayment mortgage if you have plenty of spare funds each month. Therefore, she should only pay 20% tax on the £50 over her personal savings … Make sure you consider that. You would need to be able to make a profit from your investment vehicle and preferably have a backup option to help you pay off the mortgage. If you've got an interest-only mortgage check your repayment plan now, For all the latest deals, guides and loopholes - join the 12m who get it. Mortgage deals for first-time buyers with a low deposit have been disappearing from the market since the coronavirus pandemic took hold in the UK, new data shows, Covid travel refunds - Lastminute.com, Teletext, Ryanair among the worst, Thousands bag avg £378 Help to Save bonuses, E.on takes 1.5 million payments early in direct debit blunder. We're a journalistic website and aim to provide the best MoneySaving guides, tips, tools and techniques, but can't guarantee to be perfect, so do note you use the information at your own risk and we can't accept liability if things go wrong. People who have borrowed money … Mortgages & Homes Guides - MoneySavingExpert We use cookies to make the site easier to use. UK Finance predicted that the number of interest-only mortgages set to mature during 2020 would be 54,000. We're therefore thinking about going for an interest only mortgage, at a 3-year discounted rate, but overpaying as though it's a repayment mortgage, and only reducing the payments if we absolutely needed to ie. Tools for different credit card types & purchases, Resolver - the automated complaints system. The next two peaks are 2027/2028 and 2032, and the FCA says these people are most at risk of being unable to repay their mortgage as they are likely to be less well-off and have lower equity levels. If you downsize your home, will it be big enough? This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service. There are two ways to repay your mortgage: 1. But, at the end of the term, you'll still owe the amount you borrowed - and you'll have to … When you take out an interest-only mortgage, your repayments only cover the interest on the mortgage loan. However interest only mortgages do end up more expensive over the lifetime of your mortgage because even though monthly payments are lower, the amount of interest that you pay each month will be higher. Costs of interest only mortgages. Interest-only With a repayment mortgage, you pay back a small part of the loan and the interest each month. These could be beneficial to you if you have a large amount of savings. If you are on a relatively high rate mortgage, check if you can remortgage given rates remain quite low. Interest only mortgages come with lower monthly repayments than other mortgages. We don't as a general policy investigate the solvency of companies mentioned (how likely they are to go bust), but there is a risk any company can struggle and it's rarely made public until it's too late (see the. Your mortgage adviser has some serious and important checks to complete before they can advise that you enter into an interest-only mortgage.These mortgages only work if you have the ability to save or gain the rest of the money to pay-off the mortgage through investments and other sources of income at the end of the term, and your adviser has a responsibility … Thousands of borrowers who were given interest-only mortgages could be owed compensation due to lenders mis-selling. By: Nadeem_Walayat First … With interest-only mortgages, you only pay off the interest on the amount you borrow. form of home loan where you pay off just the interest on your mortgage each month UK Interest Only Mortgage Mis-Selling Scandal - How to Claim Compensation Housing-Market / Mortgages May 03, 2013 - 03:29 AM GMT. Read our mortgage guides to help you with everything from remortgaging, moving, buying your first home and more - MoneySavingExpert. It found lenders are trying to work with their customers on repayment strategies, but there were still improvements to be made including deciding when and how to contact customers, and making the processes easier, such as having shorter wait times to speak to an adviser. An interest-only mortgage can make a mortgage more affordable but in this case it would mean that in 25 years’ time you’d still owe the lender £200,000. After the term is over, many refinance their homes, make a lump sum payment, or they begin paying off the principal of the loan. Shows which top cards and loans you're most likely to get. I.e. An interest only mortgage or interest only remortgage lets you make monthly payments which only cover the interest on the loan. If you paid the mortgage on a repayment basis you’d owe the lender nothing and own the property outright at the end of the term. Posts may be deleted and repeat offenders blocked at our discretion. Claim Your Mortgage offers to help those potentially mis-sold interest-only mortgages after 31 October 2004 gain compensation. Martin Lewis makes URGENT state pension warning - act NOW to avoid being £7k worse off MARTIN LEWIS, the Money Saving Expert, appeared on Good Morning … His father is a certified financial planner (it’s probably easier to see the benefits of saving when you share the dinner table with a money expert). Your mortgage adviser has some serious and important checks to complete before they can advise that you enter into an interest-only mortgage.These mortgages only work if you have the ability to save or gain the rest of the money to pay-off the mortgage through investments and other sources of income at the end of the term, and your adviser has a responsibility … The regulator says almost one in five homeowners have an interest-only or part-interest mortgage and is calling on them to speak to their mortgage provider as soon as possible about their repayment options. But if you're affected, the good news is you can simply cancel the calls plan penalty-free, Tesco has re-introduced restrictions on grocery sales, allowing shoppers to buy only three packs of certain items and just a single pack of toilet roll. Compare mortgages Start a quote. Since the Financial Conduct Authority's (FCA) original warning on this in 2013, the number of interest-only mortgage holders fell from 2.6 million to 1.67 million - but these customers still account for almost 18% of all outstanding mortgages in the UK Back in 2013 the FCA also identified three residential interest-only mortgage maturity peaks. Its stance of putting consumers first is protected and enshrined in the legally-binding MSE Editorial Code. The coronavirus outbreak is causing major travel disruption around the globe, TalkTalk home phone customers with its Unlimited UK Calls Boost plan will see prices rise by £24 a year from January, the provider has confirmed. Money Savings Advice is a trading name of LBLK Publishing Ltd. Referred to as retirement mortgages, they have been a big hit with older borrowers who, like you, need to raise cash to pay back a standard interest-only mortgage at the end of its term. We are very clear that people should talk to their lender as early as possible as this will give them more options when it comes to the next steps they can take.". Mortgage customers who think they have a claim should be cautious of no win, no fee firms – and instead go direct to the Financial Ombudsman Service Interest-only mortgages – what’s the problem? Claim a year's worth of tax relief, Martin Lewis: Had a PPI payout? Random Acts of Kindness and All things Positive! Martin Lewis's free site saves you money. Martin explained that this week, NS&I, […] Interest-only mortgages are loans where home owners only … Within the last week, we've seen the extension of coronavirus credit card, personal loan and overdraft help to 31 October 2020, with mortgage payment holidays already extended. The deadlines for free and cheap delivery before Christmas are FAST approaching, Trick gets TWO boxes of £2 Shreddies cereal for 60p - stack £1.50 coupon or cashback with supermarket offer. familiarise yourself with the latest version. hopefully we won't need to. Key things to remember about financial mis-selling: It’s not about whether you lost money -even if you didn’t lose out, if the product isn’t right for you – perhaps it’s a riskier investment than you wanted – you can still make a complaint about financial mis-selling. Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: "We are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their homes. So her total interest for the year was £1,050 – £50 over her personal savings allowance. Always remember anyone can post on the MSE forums, so it can be very different from our opinion. Costs of interest only mortgages. Since the Financial Conduct Authority's (FCA) original warning on this in 2013, the number of interest-only mortgage holders fell from 2.6 million to 1.67 million - but these customers still account for almost 18% of all outstanding mortgages in the UK. MARTIN LEWIS has issued a fresh appeal for HM Treasury to take action and support mortgage prisoners. Save to plug the gap. Claim Your Mortgage offers to help those potentially mis-sold interest-only mortgages after 31 October 2004 gain compensation. We often link to other websites, but we can't be responsible for their content. Shows the cost per month and the total cost over the life of the mortgage, including fees & interest. Borrowers from banks across the country could be eligible for up to £100 in compensation according to money expert, Martin Lewis. The Briton was freed, however, by a transfer to a West Brom mortgage, which slashed his interest rate from 4.59 percent to 1.84 percent, on a two-year fixed-rate interest-only deal. Our TravelMoneyMax tool compares 30+ bureaux to max your holiday cash. Mis-selling happens when they don’t and you may be owed compensation You could try to go part interest-only, part repayment, if you have the cash, so you're chipping away at more of the debt. What are your rights to a refund if you need to cancel or change a wedding? In the case of a £125,000 interest-only mortgage taken out over 25 years at a rate of 3%, the repayments would be £313 per month, with £125,000 due at the end of the term. Comparisons are free and easy, and you're sure to find a plan that suits you. Martin Lewis, Money Saving Expert, often provides money saving tips to help Britons with their financial concerns. Interest-only mortgages – what’s the problem? At the end of the term you’ll still owe the original amount you borrowed. Here are things to consider and steps you can take to identify an interest-only shortfall, and address the problem: The FCA confirmed in its 2013 research that it had not found any evidence of widespread mis-selling of interest-only mortgages. YOUR INTEREST-ONLY MORTGAGE. During this period, you only have to pay the interest, which can be very beneficial for homeowners who need extra cash flow. Interest-only mortgages. If so, you can reclaim the tax on it, Martin Lewis: A glimmer of hope for excluded new-starter self-employed, Martin Lewis: Payment holidays coming to an end – but should you take one? B) Got a PPI payout, which included £850 of statutory interest. I.e. If you've got an interest-only mortgage urgently check you will be able to pay the balance at the end of your mortgage, if you're worried you won't be able to see below for help on what you can do. “I’m kind of sitting back and letting the compound interest do the work for me,” Sprung says. Paying additional principal on your mortgage can save you thousands of dollars in interest and help you build equity faster. The big difference between offsetting and overpaying is that for most mortgages – especially newer ones – if you overpay, that money is gone from you forever. This is an open discussion but the comments do not represent the views of MSE. Other Reclaiming: Mortgage Fees, Council Tax etc, Pensions, Annuities & Retirement Planning, Report Holiday Deals, Bargains & Special Offers, Martin's Blogs & Appearances & MoneySavingExpert in the News. MoneySavingExpert.com is part of the MoneySuperMarket Group, but is entirely editorially independent. If you’re shopping online for gifts, the deadline for ordering to get ’em in time for Christmas may be sooner than you think. TalkTalk to hike cost of home phone calls package by £24 a year, Tesco limits sales of toilet roll, eggs, rice and soap, Martin Lewis: This is why I set up a charity…, Martin Lewis: Working from home due to coronavirus, even for a day? However the supermarket and its rivals insist there are currently no product shortages and are urging customers to shop normally. That means you will need a separate means of paying off the capital. See our. So, if you've a mortgage of £150,000 and savings of £15,000, then you only pay interest on the difference of £135,000. Consumers may come to us in the middle or towards the end of their mortgage term – or sometimes even after their house has been repossessed.. People complain that: they were advised to take an interest-only mortgage and now can’t afford to repay the capital ; their lender won't help because it was the broker’s responsibility to advise them The term is usually between 5 and 7 years. Compare mortgages with Money expert from a range of the top providers on the market. I will not have enough savings to pay off my interest-only mortgage. A) Earned £200 interest on her savings. However interest only mortgages do end up more expensive over the lifetime of your mortgage because even though monthly payments are lower, the amount of interest that you pay each month will be higher. For instance, where some allow you to borrow up to 95% of the value of the property, known as the loan-to-value (LTV), they will only allow a 75% LTV on interest-only deals. Consumers may come to us in the middle or towards the end of their mortgage term – or sometimes even after their house has been repossessed.. People complain that: they were advised to take an interest-only mortgage and now can’t afford to repay the capital ; their lender won't help because it was the broker’s responsibility to advise them If you're at risk of losing your home now, two Government schemes could help: Support for Mortgage Interest, and, if you're facing repossession, the Mortgage Rescue scheme. We think it's important you understand the strengths and limitations of the site. Full details in the. Almost one in five mortgage customers – around 1.7m people – have an interest-only mortgage, despite a bid by the Financial Conduct Authority (FCA) to reduce the numbers. It has only been designed to give a useful general indication of costs. DON'T MISS Interest-only mortgages often have 30-year terms with the interest-only payment period lasting for the first 10 years of the mortgage. Our Broadband Unbundled tool finds the cheapest broadband, phone and TV. We don't as a general policy investigate the solvency of companies mentioned (how likely they are to go bust), but there is a risk any company can struggle and it's rarely made public until it's too late (see the. Only get one if you are aware of the risks and have a repayment plan to save enough capital by the end of the term. That means you will need a separate means of paying off the capital. Reclaim £1,000s with MoneySavingExpert's guides to reclaims, refunds and compensation Accord has launched a short-lived 10% deposit mortgage deal. But, at the end of the term, you'll still owe the amount you borrowed - and you'll have to … Editor-in-Chief, Marcus Herbert. Compare, read, discuss and be a Money Expert. Grab the latest deals, guides, tips 'n' tricks directly from Martin and the MSE team. I reached a point where only about 18 monthly payments were left due, but meanwhile my two sons and I inherited some money which I invested. Beat the system on credit cards, shopping, special offers, mortgages, council tax, interest rate payments, freebies, loans, loopholes, best buys. This information is computer-generated and relies on certain assumptions. Finds your cheapest energy & monitors to let you know when to switch again. Wednesday 06 Mar 2019. Interest-only mortgages offer low monthly repayments making them seem attractive, but they are high-risk and less readily available than standard repayment mortgages. In Denmark, mortgages with negative interest rates went on sale last year. Don't miss out, One of the first homeowners to be released has told us he's saving almost £500/month as a result, A landmark report commissioned by MoneySavingExpert.com has put forward eight practical policy solutions to free 'mortgage prisoners', which the Government has committed to reviewing. If you plan to sell, where will you live? Martin Lewis is a registered trade mark belonging to Martin S Lewis. CORONAVIRUS HELP GUIDES, INCLUDING TRAVEL, FINANCE AND BILLS HELP, HOW YOU CAN DONATE TO A FOODBANK OVER THE FESTIVE SEASON, STRUGGLING WITH DEBT? First mortgage prisoners FREED under new affordability rules after MSE campaign, Only the Government can release the 250,000 mortgage prisoners it's failed - and coronavirus is a tipping point, so not acting now could devastate lives, Accord launches low-deposit mortgage for homebuyers – but it's not around for long, Low-deposit mortgage deals vanishing – what it means for first-time buyers, E.on takes 1.5 million payments early in Christmas billing blunder. In its 2013 review of the interest-only sector, the Financial Conduct Authority (FCA) identified three main time periods when the most interest-only loans would mature: 2012-20, 2027-28 and 2032.. The regulator's other help schemes are also likely to be extended too, including car finance and payday loans, yet should you do it? Interest-only mortgages maturing in 2019. With an interest-only mortgage, you only pay the interest during the mortgage term and then repay the full amount you borrowed when it matures. Interest-only mortgages require savings or investments and are usually only suitable for those with lots of equity and a long-term repayment plan. Interest only mortgages cost less per month than a full repayment mortgages due to the fact that you only need to pay back the interest on the loan each month. SEEK FREE HELP FROM CHARITIES. The borrower only pays the interest on the mortgage through monthly payments for a term that is fixed on an interest-only mortgage loan. For example, if your mortgage is worth £200,000 but you have savings of £30,000, you will only have to pay interest on £170,000 of your mortgage. Interest only mortgages do not suit most borrowers. Registered trading address, First Floor, 85 Great Portland Street, London, W1W 7LT. Turbo boost your credit chances and get your free Experian credit report. Some interest only mortgage lenders will accept sale of property; some will have conditions on this e.g. A) Earned £200 interest on her savings. Repayment 2. But is it any good? The earlier you start, the better. Thousands of borrowers who were given interest-only mortgages could be owed compensation due to lenders mis-selling. Establish your situation and consider whether you will really have the cash to pay off your mortgage. Interest only mortgages cost less per month than a full repayment mortgages due to the fact that you only need to pay back the interest on the loan each month. As you can see, shortening the term increases the monthly cost, but cuts the total interest by £18,000 – a monumental saving. Thousands of consumers could be entitled to large compensation payouts after they were sold interest-only mortgages that put them at risk of being forced to move in order to pay off their loans. Please contact fbteam@moneysavingexpert.com if you wish to report any comments. Interest only mortgages come with lower monthly repayments than other mortgages. An interest only mortgage or interest only remortgage lets you make monthly payments which only cover the interest on the loan. So her total interest for the year was £1,050 – £50 over her personal savings allowance. Interest-only mortgages are available for both residential, and buy-to-let mortgages, but are more common for buy-to-let properties. If your after-tax rate on savings is lower than your mortgage rate, you may want to repay your mortgage with savings. Borrowers with Jyske Bank were lent money at a rate of -0.5%, which meant the sum they owed fell each month by … You use savings, investments or other assets you have (known as ‘repayment vehicles’) to pay off the total amount borrowed at the end of your mortgage term. The PPI deadline may have passed, but if you're one of the millions of people who have reclaimed part of the £38,300,000,000 paid out so far, or you're one of those waiting to hear if a payment will come, you need to know about the tax on PPI payouts. Find cheap pick-up only items near you - they often attract fewer bids. Do note, while we always aim to give you accurate product info at the point of publication, unfortunately price and terms of products and deals can always be changed by the provider afterwards, so double check first. Blog of Martin Lewis - MoneySavingExpert. Interest-only mortgages are risky, it’s important an advisor fully explains this to you. Interest-Only Mortgage Compensation If you took out an interest only mortgage to buy your home and feel that the risks and suitability for your situation were not properly explained to you, then you could be one of the hundreds of thousands of homeowners eligible for interest-only mortgage compensation. Please read the Full Terms & Conditions, Privacy Policy, Cookies Q&A, How this site is financed and MSE's Editorial Code. Interest Only Mortgages If you were only paying the interest on your mortgage each month, then the advisor should have made you aware how you would repay your mortgage when it finished. We explain how interest-only mortgages work, and look at the options for those worried about paying off the amount borrowed at the end of the term. We often link to other websites, but we can't be responsible for their content. You may not pay that much more on a repayment than on an interest-only if you move from a high rate to a cheaper one. B) Got a PPI payout, which included £850 of statutory interest. Types of complaints we see. Do note, while we always aim to give you accurate product info at the point of publication, unfortunately price and terms of products and deals can always be changed by the provider afterwards, so double check first. If your lender allows, you could extend the term of your loan to give you more time to build up funds to pay off the debt. Money expert. Mortgages, credit cards, loans, payday loans, car finance and more, Amazon Warehouse – get returned items or mildly damaged products for knock-down prices, LAST OOOOORDERS! With an interest-only mortgage, the borrower pays interest at a fixed or adjustable rate during the interest-only period. Don't miss out, Get this free weekly email full of deals, guides & it's spam free, 'Severely mentally impaired' council tax discount, Travel insurance for pre-existing conditions. "We know that many customers remain reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons. Assuming you make all your payments, you’re guaranteed to pay off the whole loan at the end of the term. If you've got an interest-only mortgage you need to check your repayment plan now. If you have an endowment, sadly, mis-selling cases are, by and large, no longer possible because the time limit has passed. NatWest require you to have at least £200k of equity in your property at time of sale. When you take out an interest-only mortgage, your repayments only cover the interest on the mortgage loan. Editor, Marcus Herbert. If your broker or lender didn't discuss this with you or give you examples of the cost of a Capital and Repayment mortgage compared to the lower costs of an Interest Only mortgage, then this would be … Cynical claims management companies are duping homeowners into believing they could win compensation for mis-sold mortgages - when actual chances of success are slim. To check your repayment plan now site but spam, bullying and offensive comments will not have enough to! Customers to shop normally editorially independent money saving tips to help you with everything from remortgaging moving... Mortgages with negative interest rates, with the interest-only payment period lasting for the first 10 of! Three residential interest-only mortgage standard repayment mortgages mortgage rate, you pay back a part. We think it 's important you understand the strengths and limitations of the mortgage, you pay back a part. Been invaluable to many people, especially during the interest-only period an independent mortgage broker amount of.. Cookies to make the site easier to use help switching mortgage, try the, you. 2004 gain compensation come with lower monthly repayments making them seem attractive, but is entirely editorially independent mortgages. That the number of interest-only mortgages set to interest only mortgage compensation money saving expert during 2020 would 54,000... B ) Got a PPI payout, which can be very different from our opinion plan sell... The monthly cost, but cuts the total interest for the year was £1,050 – £50 over personal! 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Repayment plan now homeowners who need extra cash flow confident that we can very! Of dollars in interest and help you build equity faster protected and enshrined in the MSE! Posts may be owed compensation due to lenders mis-selling fixed or adjustable rate during the interest-only period TravelMoneyMax tool 30+... Potentially mis-sold interest-only mortgages are loans where home owners only … a ) Earned interest! Want everyone to enjoy using our site but spam, bullying and offensive comments not... Want to repay your mortgage with savings a relatively high rate mortgage try..., at the end of the site W1W 7LT certain assumptions a fixed or adjustable rate during the ongoing pandemic. Bit of a leg up understanding the power of compound interest interest only mortgage compensation money saving expert credit report,... Advisor fully explains this to you if you are interest only mortgage compensation money saving expert a relatively high rate,. To repay your mortgage with savings make all your payments, you may deleted..., will it be big enough mortgage … types of complaints we.! 30-Year terms with the interest-only period Nadeem_Walayat first … a ) Earned £200 interest on the MSE forums, interest only mortgage compensation money saving expert! Chances and get your free Experian credit report enough savings to pay off the.., W1W 7LT is lower than your mortgage can save you thousands of dollars interest! Is entirely editorially independent beneficial for homeowners who need extra cash flow you understand strengths... … a ) Earned £200 interest on the mortgage loan sale last year journalist has invaluable! Only mortgage mis-selling Scandal - how to claim compensation Housing-Market / mortgages may 03, 2013 03:29! Your credit chances interest only mortgage compensation money saving expert get your free Experian credit report general indication of costs only have pay! Our site but spam, bullying and offensive comments will not be.... N'T be responsible for their content to max your holiday cash offensive comments will not be tolerated remember can... Lenders mis-selling or adjustable rate during the interest-only payment period lasting for year! Strengths and limitations of the term increases the monthly cost, but cuts the total interest the. Finds your cheapest energy & monitors to let you know when to switch again in. Registered trade mark belonging to Martin S Lewis registered trading address, first Floor, 85 Great Portland,. General money or debt advice, try an independent mortgage broker repeat offenders blocked at our.! Been invaluable to many people, especially during the interest-only payment period lasting for the year was £1,050 – over. Contact fbteam @ moneysavingexpert.com if you wish to report any comments mortgage to... Customers to shop normally make all your payments, you only pay the interest on the mortgage cheap... 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