Brokers are split over whether they would offer a first-time buyer an interest-only mortgage, shows research by Alliance & Leicester.
Of 202 brokers questioned, 51% say they would recommend an interest-only mortgage to a first-time buyer, 34% say they would not and 13% are uncertain.
Mehrdad Yousefi. head of intermediary mortgage at A&L, says: “This remains a topical subject, but for every person who thinks interest-only is a good idea for first-time buyers there is another who feels it is not.
“I believe there is a place for interest-only repayments for first-timers but it must be based on their individual circumstances, both now and in the future. Things such as occupation, level of debt and attitude to risk must be borne in mind. Brokers must work closely with first-timers to ensure they recommend the appropriate product.”
But Rob Clifford, chief executive of mortgageforce, says that although 51% of brokers are willing, the uptake of interest-only mortgages is still relatively low.
He says: “It is a viable option for first-time buyers and brokers tend to take a more holistic approach to interest-only as they look at the long-term benefits of financial planning.
“As long as there is some sort of repayment vehicle in place and the broker has taken into account their client’s circumstances there should be no problem.”
Clive Briault, managing director of retail markets at the Financial Services Authority, last week revealed its concerns over the advice process that brokers go through when recommending interest-only mortgages. The FSA will soon release its findings on the quality of advice given but he says early signs aren’t encouraging, particularly for interest-only mortgages.