The Council of Mortgage Lenders figures are showing a growing trend in interest only mortgages. From January to March 2002, 9% of new mortgages were interest only. Now take the period from October to December 2005, and the amount of new interest only mortgages has risen to 23%. In the same timeframe, the number of first time buyers choosing interest only mortgages has increased from 6% to 15%.
Theres a good reason for this upturn, and thats because the monthly payments are so much lower than with a repayment mortgage. All you have to do is pay the interest, delaying the repayment of the capital itself until the end of the mortgage term when it is paid off in full.
Getting an interest only mortgage is an easy way to avoid having to change lifestyle habits like eating out and holidays and having a mortgage is incredibly affordable this way. However, we think that there could be a lot of people in trouble in the future when they realise that they didnt start saving soon enough for this eventual lump sum payment.
The Financial Services Authority (FSA) have voiced concerns about homebuyers potentially getting an interest only mortgage and not making sufficient...
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