Advisors report increasing demand for interest-only loans

February 2, 2024 by Brendan O'Neill

Mortgage Advisors

Mortgage advisors are reporting that there has been a rise in the level of demand among their clients for interest-only loans during the past 12 months, according to a new survey.

This survey comes from Mortgage Solutions and it found that close to 64% of UK advisors that responded have seen rising demand for loans of that type. That adds up to around two thirds of them. Roughly 46% told the survey that there had been some increase in the numbers of clients choosing those mortgages, while 18% reported seeing large increases in this.

Not all of the advisors interviewed for the poll reported rising enthusiasm among interest-only loan clients, though. Over a third (36%) of them stated that demand for those products had remained around the same level.

Interest-only mortgages are ones where borrowers make repayments on the interest per month instead of the main loan. It generally means that the monthly payments are much less for the duration of the loan period, but does also mean that the primary loan must then be paid as a lump sum.

Greater consumer demand for these products is being driven by financial pressures caused by the rise in everyday living costs. People now have the option of moving to interest-only repayments for a six-month period too, thanks to Mortgage Charter rules, and that is also likely to be a factor.

Advisors with the CeMAP qualification will recommend them cautiously as large payments have to be made at the end of the term.