As a regular reader of your magazine, I am familiar with all the arguments about interest-only mortgages taken out for affordability reasons.
Although there is still a place for interest-only mortgages in the market, for affordability reasons alone they should be a big no-no.
I’m also aware of the arguments for and against brokers charging for ad-vice – if they do, it might deter people who cannot afford or are not prepared to pay for professional advice. These people often turn to lenders, family, friends, the milkman or even financial journalists for guidance.
Consequently, it was with interest and surprise that I read a recent internet article by the BBC’s Evan Davis which I found at www.bbc.co.uk/blogs/thereporters/evandavis
Bear in mind, this article is not from the money section of a tabloid but the BBC.
It was published just before this month’s base rate decision by the Bank of England and highlights the fact that recent base rate rises may not have had an effect as many people are still on fixed rates which will be ending soon, and points out that these people will see a significant rise in their payments.
Davis states that “people who are desperate can minimise their monthly payments by switching to an interest-only mortgage to alleviate the pain if they expect their income to rise over time. Indeed, the interest-only pheno-menon is catching on”.
Unbelievable – this from someone working for the same organisation that will probably soon broadcast a high-profile investigation into the number of borrowers on unsupported interest-only mortgages, advised to take these out by their brokers.
What does Davis think borrowers already on interest-only mortgages should do – ask for their payments to be suspended and go into arrears?