BLOG: Interest-only – still the elephant in the room?
Here we are in 2013 and all of sudden the mainstream media is talking about interest-only mortgages.
For brokers of course, it’s been the elephant in the room for several years – as we struggle to make clients aware that the issue just will not go away and that the mortgage world has changed.
You do get the feeling that a lot of the lenders feel the same – after spending decades lending on interest-only terms, suddenly a lot of them don’t want to know.
Well… that’s just fine. For them.
But what about those borrowers who they gladly lent money to on that basis in the past then?
Has ‘Treating Customers Fairly’ become redundant all of a sudden?
All borrowers in the UK should be revisiting their mortgage arrangements in 2013 to see how they fit into the lenders new lending criteria – not doing so could mean that they sleepwalk into problems.
How many borrowers are aware of the changes to interest-only mortgages in the last 3 years? With reduced loan-to-value ratios, and limited repayment vehicles now, could many of those borrowers really remortgage without switching to a capital repayment basis? Could they realistically afford to?
For many borrowers who are over 50, is it financially feasible for them to convert their mortgage to capital repayment terms? More importantly, what procedures do the lenders have in place to assist these borrowers? There could be big challenges ahead for all parties concerned.
Interest-only mortgages did offer, when planned correctly, a viable opportunity of achieving home ownership for many borrowers – however the current situation regarding them needs to be handled correctly, and very importantly, sensibly.
Building societies are actively looking to help borrowers left behind by the high street lenders after their interest-only policy changes – I hope that the high street bears in mind that borrowers, and brokers, have very long memories.
Stuart Gregory is managing director at Lentune Mortgage Consultancy