Poor performing endowment policies were the reason behind\u00a0a\u00a0large number of borrowers finding themselves unable to repay their interest-only mortgage at the end of their mortgage term. As a result, interest-only mortgages disappeared as a\u00a0mortgage choice\u00a0for the wider market,\u00a0as lenders considered\u00a0the risk\u00a0too high.<\/p>\n
In May 2013, only 102 interest-only mortgages were available, but moneyfacts.co.uk has discovered that\u00a0the number has almost\u00a0doubled\u00a0over the past six years. Today there are 193 interest-free mortgage products available to borrowers.<\/p>\n
While this is still a relatively small proportion of the overall mortgage market (3.86%),\u00a0it does seem to show a willingness by lenders to relax the rules when it comes to risk.<\/p>\n
Interestingly, while the number of interest-only mortgages\u00a0available\u00a0has\u00a0increased,\u00a0there has been no marked rise in borrowers taking\u00a0them\u00a0up.\u00a0Borrowers, it seems, remain cautious\u00a0around the\u00a0prospect\u00a0of an interest-only mortgage after the highly publicised fall out of failed endowment policies leaving many without any means to repay their mortgage.<\/p>\n
However, it is more likely that borrowers are put off by lender requirements to secure an interest-only mortgage\u00a0today.\u00a0Applicants\u00a0are expected to present a\u00a0viable and robust\u00a0plan for repayment of the mortgage early in the application process for\u00a0inspection by the lender. Jumping through hoops to pass stricter lending criteria and presenting a\u00a0feasible\u00a0repayment plan that will pass\u00a0the scrutiny of the lender\u00a0is likely to put many\u00a0people\u00a0off,\u00a0when they coud\u00a0choose a simpler course of action with a straight repayment mortgage.<\/p>\n
44 of the 193 interest-only products available are retirement interest only mortgages\u00a0aimed at\u00a0borrowers approaching retirement with no means to repay their interest-only mortgage due to a failed investment or lack of planning.<\/p>\n
The Financial Conduct Authority (FCA) stepped in and loosened the regulations, resulting in\u00a0a greater choice of retirement interest-only products\u00a0that\u00a0will allow mature borrowers\u00a0to pay only their monthly interest on their mortgage until they die or enter long term care,\u00a0when the property is sold to repay the capital.<\/p>\n
Interest-only mortgages may be back on the table, but it\u2019s unlikely they will become the mortgage of choice again as both lenders and borrowers prioritise minimising risk.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
Interest-only mortgages used to be all the rage\u00a0with borrowers, until lenders\u00a0deemed\u00a0them too risky for the mass market and limited their offerings\u00a0after the financial crash. However, research by Moneyfacts.co.uk seems to suggest that the tide\u00a0might be\u00a0turning. Poor performing endowment policies were the reason behind\u00a0a\u00a0large number of borrowers finding themselves unable to repay their interest-only mortgage at… Read more »<\/a><\/p>\n","protected":false},"author":3380,"featured_media":5023591,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[26],"tags":[415],"acf":[],"_links":{"self":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts\/5023590"}],"collection":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/users\/3380"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/comments?post=5023590"}],"version-history":[{"count":0,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/posts\/5023590\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/media\/5023591"}],"wp:attachment":[{"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/media?parent=5023590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/categories?post=5023590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buyassociationgroup.com\/en-au\/wp-json\/wp\/v2\/tags?post=5023590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}