Proportion of interest-only mortgages ''not extreme''


Thu 27th Mar, 17:05:44 GMT

The proportion of people opting for interest-only mortgages is not "extreme", a mortgage broker has said.

Figures from the Council of Mortgage Lenders show that the proportion of first-time buyers with an interest-only mortgage who did not specify how they planned to repay their mortgage has risen from six per cent in 2002 to 20 per cent in 2007.

The chief operations manager of Alexander Hall, Andy Pratt, said that while a good mortgage advisor would not recommend an interest-only product, its suitability depended heavily on an individual''s circumstances.

He continued: "Instead of relying upon the lender to control the amount that they pay off on the loan, some feel quite knowledgeable and confident enough to pay the interest and control for themselves how much of the loan they pay off by doing it in lump sums every two or three years."

Mr Pratt said he would expect the proportion of interest-only mortgages to decrease in the event of a drop in property prices with buyers seeking to avoid a "negative equity situation".
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