Interest-only mortgages – what’s available?
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Interest only is not good or bad – it’s not that black and white. Interest only is necessary, suitable and appropriate for a certain type of borrower. It is not suitable for everyone and in retrospect perhaps at the height of the market interest-only mortgages were dished out rather too freely.
“It is a shame that lenders follow each other like sheep and are all reining in their interest-only lending. We welcome Santander’s move to relax its approach to interest-only recently and we would hope that further down the line other lenders will do the same. The problem is that lenders are scared to stand out from the crowd, which is a shame for many borrowers because interest only is the right choice for them.
“The market desperately needs innovation. I know of two lenders who are looking at 25-year mortgages with an interest-only option for the first five years and repayment for the remainder, so that the mortgage balance is cleared by the end of the term. This would enable the buyer to get work done on the property, buy furniture, do all the things people do when they move home but without having to borrow at much higher rates of interest charged on hire purchase or store cards. Which is better? A 4 per cent mortgage rate on an interest-only basis or nearly 30 per cent on HP?”mortgages
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