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Interest-only mortgage? Try a private bank

01.05.2012

With more mortgage providers cutting back on interest-only lending, the estimated 1.5m borrowers on an interest-only mortgage may be wondering what will happen to them. Switching to a repayment mortgage may be your lender’s preferred option but this will mean a significant jump in your monthly mortgage payments, and may not be compatible with your income streams.

Lenders have followed each other like sheep, reducing maximum loan-to-values on interest-only to around 50 per cent, insisting on a restricted number of repayment vehicles or a minimum income of £50,000 per annum, or in some cases, refusing to offer interest-only at all. They blame the Financial Services Authority for proposals in its Mortgage Market Review (MMR) that mean lenders will have to regularly check borrowers’ repayment vehicles to ensure they are on track to pay off the loan. This will increase the burden on lenders, with some deciding that they are better off not offering interest-only at all or on a much-reduced basis.

The end of interest-only was not what the MMR intended to achieve but this seems to be the sad result. Subsequently, borrowers have become ‘mortgage prisoners’ stuck on their existing deals, unable to remortgage or move to another property.

Yet interest-only may still be the correct solution for certain borrowers, those who have a repayment strategy in place and review it on a regular basis. Interest-only borrowing is still available for the right sort of client via the private banks. Brokers such as Anderson Harris can access such deals, and are happy to review your funding arrangements to see whether you would meet criteria. Please get in touch if you wish to discuss this further.

Adrian Anderson
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Adrian Anderson
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