Those switching to interest-only mortgages to help improve their financial situation during the current economic crisis have been warned that they should not be seen as a long-term mortgage option.
Barney McCarthy, editor of YourMortgage.co.uk, stated that such finance packages have the benefit of improving cash flow, but urged those who move to such a mortgage to make sure they can meet repayments.
“As soon as you take [the mortgage] out you should either have a repayment vehicle set up or at least have plans to do one,” he advised.
Those who have been considering moving onto an interest-only mortgage, possibly as part of a debt management plan, may wish to heed Mr McCarthy’s advice.
Recent LV= research revealed 45 per cent of the 2.9 million interest-only mortgages in place in the UK do not have an investment plan in place to help repay the capital on the loan.
By Tom Musk