View more on these topics

Comment: Some customers are bombproof


For borrowers with a decent salary and a credible plan to repay their mortgage, interest-only products have a place

The interest-only mortgage is a controversial product, referred to in some quarters as a ticking timebomb. The moniker results from the glut of deals agreed in the 1990s with borrowers who had no strategy for repaying the mortgage.

In the next few years, around 934,000 borrowers could be in financial danger as these deals reach maturity. Banks and building societies have been urged to contact customers to warn of the risks they face, with some borrowers expected to be forced to sell their home if funding is not available.

Interest-only loans were seen as one of the worst examples of irresponsible lending in the lead-up to the credit crunch. The rules were subsequently tightened to reduce the level of such lending and, by the end of 2012, most lenders had stopped offering the products altogether.

Since then, however, interest-only loans have slowly been reintroduced to the market. The majority of lenders now offer some form of interest-only mortgage but with far stricter criteria, such as a deposit of 25–50 per cent and an income of £75,000 a year or more.

Such mortgages can be a viable option for those who have an exit strategy in place or who receive big bonuses or a large part of their pay as commission. They also still hold the potential to work well for buy-to-let landlords.

In the short term, interest-only mortgages are unlikely to be anything more than a niche product. Tightened restrictions and concerns around a repayment shortfall mean they should not be used by the majority of homeowners. However, for those with a decent salary and a credible plan to repay the mortgage, this product certainly has a place.

Carl Shave is director at Just Mortgage Brokers



Bluestone hires McGuinness as group chief executive

Bluestone Group has appointed Peter McGuinness as group chief executive. Bluestone founder and executive chairman Alistair Jeffery will become non-executive chairman. Jeffery says: “Peter is the ideal candidate, combining wide international accounting and structured finance skills with deep operational experience in the specialist lending sector.” McGuinness joined Bluestone in Australia in 2003 to establish its […]


Barclays updates BTL affordability checks

Barclays has updated its affordability assessments and minimum gross income requirements for new buy-to-let lending. The lender is making the changes to comply with Prudential Regulation Authority minimum underwriting requirements coming in on 1 January 2017. The lender is removing its separate rental coverage requirement and simplifying its minimum gross income requirement to be £25,000 […]

FCA logo new 3 620x430

Product transfer sales tactics ‘break MMR rules’

Lenders’ product transfer sales tactics break Mortgage Market Review rules around non-advised sales and should be reviewed by the Financial Conduct Authority, according to industry experts. Last week the Association of Mortgage Intermediaries published its quarterly economic bulletin, which called out lenders for potentially causing consumer harm through a lack of transparency around product transfers. […]


News and expert analysis straight to your inbox

Sign up