UK mortgages interest only deals to become a thing of the past.
Previously for many borrowers, UK mortgages interest only deals offered a cheaper way to buy a property than a standard capital repayment mortgage. Borrowers only paid off the interest each month and, while they were not paying off the capital sum, they were property owners and they did manage to get a foot on the property ladder.
Research shows that between 2005 and 2009 around one million home-owners opted for UK mortgages interest only deals, by 2007 the Council of Mortgage Lenders statistics showed that 33% of all mortgages taken out that year were interest only deals. It was a time when a home-owner could pay a small fee and switch easily from a repayment to interest only deal. Now according to many UK lenders, interest only mortgages are quickly becoming a thing of the past. Since the start of the financial crisis many lenders have effectively pulled their interest only mortgage products. Some lenders will still allow borrowers to have an interest only mortgage, but at a price.
Many lenders are now wary of offering interest only mortgages to potential home buyers, especially first-time buyers. The Financial Service Authority has proposed new rules to prevent a return to risky lending. Lenders will be required to verify the income of each borrower and they will have to ‘stress test’ mortgages to ensure borrowers can still afford repayments if rates were to rise. Borrowers will no longer be able to use UK mortgages interest only deals as a cheap way to purchase property.
