Interest Only Mortgage Fears | Number One Mortgages
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The BBC recently published an article about interest only mortgages and the shocking volume of people who are likely to be effected in coming years when they haven’t made provisions to repay the original debt. It’s an interesting topic and something that has also sparked over 900 comments on the article.
Interest only mortgages became popular in the early 2000’s and according to Citizens Advice Bureau by 2027-28 will be when the first peak of repayment problems are expected to appear. The next wave resulting from the (often described as irresponsible lending) pre ‘credit crunch’ will come in 2032.

The Citizens advice bureau estimate the number of people who will be effected to reach 934,000 and almost 432,000 of these won’t have even thought about how to repay the debt amount. The daunting reality that nearly 1 million homeowners are facing is that they are likely to have to sell their home to repay their debt or have their home repossessed if they’re unable to find other funds.

Since the ‘glory days’ of interest only the rules have tightened up on lending and three years ago saw a distinct and abrupt reduction in interest only mortgages being offered and granted. It has been recognised that without the need to pay back some of the loan each month on top of the interest that many were opting to over stretch themselves to attain their dream home.

The BBC article recalled the story of local Brightonian Sarah and her struggle with an interest only mortgage.

Sarah has an interest-only mortgage, said she and her husband could hardly afford the interest when they bought their house and frequently fell into arrears.

“We were silly. We’d just had our first baby,” she said.

“But they shouldn’t have given the loan. We didn’t understand what we were taking on and didn’t think about having to pay it back.”

They have 16 years until they have to return nearly £200,000, but admit the debt has become a constant worry.

The good news is that the regulators have told the banks and building societies to write to their customers and explain the financial danger they could be facing. A spokesman for the FCA said: “We expect firms dealing with interest-only borrowers to discuss repayment strategies and propose solutions where there are no plans in place.

If you’re currently on an interest only mortgage with no provision in place to repay the original debt, then speak to Number One Mortgages. With the current mortgage deals in the marketplace at the moment it can be possible to keep the monthly outgoings similar and switch to a repayment mortgage, helping secure your financial future.

Think of it this way……… an online agency are responsible for gaining interest from potential buyers to contact you for viewings.  Traditional agents do this too, but they also see the whole sales process through from start to finish. Traditional agents will promote your property, gain enquiries and be the port of call for arranging visits right through to showing them around the property and negotiating the sale. Most of us aren’t trained sales people and if a traditional agent has the skills and ability to not only take the burden of marketing, managing a diary of buyer visits and negotiating during the sales process then surely this is a worthwhile investment?

Before you instruct an online agency it would be wise to be sure that you have the necessary time and skills to dedicate to the project of selling your home. If you’re getting a new kitchen you’d either DIY with the right skills, experience and time; or opt to find a kitchen designer/installer managing the process to take the stress out of it; the same is true when choosing to instruct an agent to sell your home.

The biggest allure of the online agencies from what I can see is the price, but think about this…. Could a professional estate agent showing a potential buyer around your home negotiate 1% more than you could achieve doing the same to cover their fees? We expect that they could and so we’re sticking two thumbs up to our estate agent friends in Sussex.