Worries as borrowers go the interest-only route to get a house
Almost a quarter of mortgage holders (22%), or 2.3 million people, are currently on an interest-only mortgage, according to research carried out by Purely Mortgages.
The research shows that 27% of all interest-only mortgages having been taken out in the last two years as property prices have soared. During this period, 29% of single homeowners and 21% of couples have opted for the product.
A further 12% would consider an interest-only mortgage just to be able to get on to the housing ladder.
According to Purely Mortgages, people taking out these loans without an investment vehicle to pay back the capital is a big problem – representing 55% of the total.
Mark Chilton, chief executive of Purely Mortgages, said: “It’s worrying that there is a rising trend towards interest-only mortgages, which are seen by many as a cheap way of affording mortgage repayments.
“As our research shows, few have repayment vehicles in place and this could be storing up big problems for the future as the capital amount of the loan will still need to be settled once the interest is paid off.”