Interest-only mortgages ‘make sense’

Posted 2008-03-25

Interest-only mortgage remains a viable option for getting a foot on the housing ladder and do not deserve to be vilified, a senior figure in the Council of Mortgage Lenders (CML) has claimed. Bernard Clarke, communications manager for the CML, said that interest-only mortgages are a "perfectly rational approach" to the housing market for many prospective homeowners. He acknowledged concerns over recent figures which show that the uptake of such mortgages has risen dramatically, but insisted they are relatively innocuous provided people are made aware of their long-term implications. "If theyre taking it from an informed point of view then there isnt a need for concern about that," Mr Clarke insisted. "If borrowers are taking opportunities later when they remortgage to address the problem then thats fine." He added that on a historical level the uptake of interest-only mortgages remains relatively low, with some 80 per cent of home loans approved in the 1980s being taken out on an interest-only basis. Today that figure stands at just 24.5 per cent, but it has been rising steadily having bottomed out at around 21 per cent in 2006.

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