Every dark cloud has a silver lining, so I urge all brokers to take heart in the wake of a number of lenders withdrawing from interest-only loans or reducing the LTV they will permit for interest-only.
Of course, this is going to make remortgaging that much more punitive for many borrowers, particularly those who want to raise capital.
The argument in favour of secured loans as a natural option for borrowers who do not want to upset their mortgage arrangement is becoming more than just a fringe activity.
Perhaps it is not such a surprise that with rates on secured loans nudging under 7%, advisers should be thinking about the options secured loans provide when it comes to advising on the best way to raise capital.
Not only should a secured loan be considered where a remortgage would be at a higher rate than the existing mortgage, but also when a remortgage would trigger a move from interest-only to repayment, resulting in unnecessary payment shock.
Secured loans have always been a natural fit for clients who want to borrow for capital-raising purposes and not tie in their extra borrowing to the length of their mortgage term.
Given the transparent charging structure, maximum of two months’ interest for early redemption and the appealing rates, there is a strong case for secured loans taking more of a front row seat when borrowing options are being considered for clients.