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Move clients over to repayment deals

The past few years have witnessed some fairly significant changes in the proportion of mortgages being repaid by the capital and interest repayment method.

In 2002, the proportion of mortgages bring repaid by this method was at a peak of around 88%.

But over the following five to six years the proportion fell to a low of 67%.

Meanwhile, the number of mortgages set up as interest-only products with no specified repayment vehicle increased quite markedly – accounting for some 20% or more.

Then in 2008 there was a reduction in the proportion of mortgages being set up as interest-only with no specified repayment vehicle, to 14% for the year.

And in the last quarter of 2008 and the first month of 2009, the proportion of cases set up on this basis fell to just 9%.

This compares with 80% of borrowers electing to repay their mortgages on a capital and interest repayment basis.

The rapidly reducing cost of borrowing has helped borrowers, with a smaller percentage of net income now required to service a mortgage.

More and more people are now electing to repay their mortgages on a capital and interest repayment basis from the outset.

Brokers who still have clients for whom they set up interest-only mortgages with no specified repayment vehicle should now be using the favourable pricing environment to look at reappraising those arrangements.

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