Unrealistic expectations for interest only borrowing

2nd November 2012
Islay Robinson GROUP CEO

Islay Robinson

Unrealistic expectations for interest only borrowing

Islay Robinson

57.6% of those with interest only mortgages think house prices will rise enough for their debt not to be a problem at the end of the mortgage term according to research carried out for HML. The research, conducted among more than 1,000 people also revealed that only three out of 10 of borrowers with an interest only mortgage are confident they have a plan that will repay the whole debt. Three out of 10 home owners have an interest only debt: 16.5% of borrowers have an interest only mortgage with a further 14.5% having a part interest only and part repayment mortgage. HML says that awareness of interest only among borrowers is not an issue.

Of the people who know they have an interest only mortgage, 91.6% know they need to repay the capital at the end of the mortgage term. A majority (59.7%) have a plan, 39.3% do not. Of those people who do have a plan only 47.2% are confident the whole debt will be repaid. This means seven out of ten people with an interest only mortgage need help to repay the capital at the end of the mortgage term. HML chief executive Andrew Jones said: “There is an unrealistic expectation amongst a significant number of interest only borrowers that annual house price inflation will return to double digits and dig them out of a sticky situation. There is a challenge to help consumers understand there isn’t going to be a return to runaway house price rises any time soon and it is therefore their responsibility, along with lenders, to make appropriate arrangements to address the issue.”

Interest only borrowing has become a much trickier mortgage terrain since the crash of 2008, with many borrowers unsure of how the future of interest rates could affect their term. The greater likelihood of such hurdles is not the case at Enness Private Clients, however, and our access to a hold host of specialist solutions and contacts with private banks across the market. An expert broker will know the best way to tackle the latest changes to interest only borrowing, and you can best benefit from them. Feel free to contact us anytime for a personal consultation.