Over the last 10 years, interest-only mortgages have been used to help borrowers meet high house prices and then take advantage of their property’s growing value. The Council of Mortgage Lenders’ (CML) monthly data on how borrowers repay their mortgages shows why they now see interest-only mortgages as a problem.
The table here will help to demonstrate this.
With interest-only mortgages now only available from a few niche lenders, and where the loan amount does not exceed 80% of the value of the property, it seems safe to say that the proportion of interest-only deals will fall further.
Lenders are understandably concerned that they will stand to lose out in a falling property market, and where there is no mechanism for repayment of the capital, but without it, many first-time buyers will struggle to buy and that first rung of the ladder will remain out of reach for a long time to come.
This makes it difficult for the property market because without the lifeblood of first-time buyers the whole system stagnates. Hopefully lenders will have an alternative up their sleeve.
