Rise in number of lenders offering interest-only mortgage options

The number of lenders offering interest-only mortgage products has increased modestly over the past two years, according to the latest research from Moneyfacts.

The data analyst says that eight additional lenders now offer an interest-only mortgage, indicating a renewed willingness to provide this form of lending.

A total of 33 lenders now offer interest-only mortgages.

However these figures should be seen against data from UK Finance, which shows that the number of homeowners with interest-only mortgage has almost halved in six years.

Moneyfacts finance expert Charlotte Nelson says that there has been “turbulence” in the interest-only mortgage sector in recent years.

She adds: “There is confidence among some lenders, as the number of providers offering this option has increased to 33. However, the number of lenders in this sector is a long way from how things were 10 years ago, with 73 lenders offering interest-only mortgage options in June 2008.”

Many lenders stopped offering these mortgages in the wake of the financial crisis and subsequent credit crunch. Sales were further curtailed by the Mortgage Market Review, which put the onus on lenders to ensure borrowers could repay this debt.

Nelson adds: “With competition for business in the mortgage market high, providers have started to branch out into niche areas such as interest-only.

“However, there have been warnings about interest-only mortgages, with the FCA concerned that many borrowers may not be able to repay the capital at the end of the term.

“It is therefore important to note that interest-only options are purely available to those at lower loan-to-values, and with strict regulation, borrowers must be able to prove they have a repayment strategy in place. This rules out a lot of borrowers simply because they do not have a large enough deposit or a secure enough plan.”


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  • Paul Smulovitch 4th June 2018 at 10:51 am

    And whilst lenders off these schemes there are the all the claims companies urging people to make claims against brokers who suggested these were right for borrowers at any point. the reality is for many they are appropriate schemes but if peoples circumstances change it shouldn’t be the point that brokers are challenged for the client to try and get a free ride. Even though we have all the correct documents and procedures the time it takes to deal with any complaints and the stress it causes is damaging.