The Times reports return of interest-only loans

July 4, 2015 by Brendan

News

With the intense competition between lenders at fever pitch, it appears that as they compete with each other to secure the biggest share of the market, the availability of

interest-only loans appears to be increasing.

Once deemed a riskier lending option, interest-only loans had all but vanished from the market following the financial crisis in 2008. More recently though, according to the Times, lenders have begun to slowly introduce interest-only deals that allow the borrower to specify they will sell the property to repay the debt – providing they have a minimum deposit of 25%.

This type of borrowing was popular as it resulted in lower monthly payments, although the capital was not being reduced at all. Over the period of the mortgage interest-only options carried much greater risk, because at some point the buyer would face a big increase in their monthly payment or risk having the sell the property earlier than they wished to repay the capital.

Over 30% of the market consisted of interest-only loans in 2007, and the figure had plummeted to fewer than 5% in 2014 according to figures from the Council of Mortgage Lenders (CML).

As a qualified mortgage professional who has undertaken and passed your CeMAP training and associated exams, you will be the initial point of contact for customer looking to purchase their first or subsequent home. After completing an affordability assessment, and establishing their current financial position looking at points such as their available deposit, you can recommend the appropriate mortgage package for their individual circumstances.