Borrowers ‘shunning interest-only mortgages’

The number of interest-only mortgage deals on the market is decreasing as lenders are increasingly favouring long-term fixed-rate finance packages, new research has found.

Data collected by Paragon Mortgages from over 200 financial advisors has found that interest-only options accounted for 23 per cent of mortgages issued by lenders in the third quarter of 2008, a three per cent drop on figures recorded during the first quarter.

And nearly half (49 per cent) of homeowner loans provided to borrowers were fixed-rate deals, up from 46 per cent in the first quarter.

“Borrowers are … looking for security and are locking themselves into long-term fixed-rate deals,” managing director of Paragon Mortgages John Heron explained.

Fixed-rate deals may appeal to those looking to implement a debt management plan, as borrowers will know exactly how much they need to repay each month.

In related news today, the government has announced a new plan aiming to help homeowners facing repossession due to suffering a loss of income.

The scheme will allow those struggling financially to defer mortgage interest repayments for up to two years.

By Tom Musk