Mortgage companies are warming up to interest-only loans as several lenders have re-entered the market in the last year.Data published by Moneyfacts, the financial analysts, showed the number of lenders offering interest-only loans increased to 33 in the last year. Ishaan Malhi, of online mortgage broker Trussle, said lenders were looking to satisfy the needs of borrowers. He said that the City watchdog, the Financial Conduct Authority, had recently loosened the rules on retirement interest-only mortgages, which would also boost the sector.“We’ve seen an increase in the demand for interest-only mortgages, due to lifestyle changes, equity releases and niche customer situations,” he said.
This charge has largely been driven by the mutual sector with Accord (part of the Yorkshire Building Society) and the Hanley Economic, Hinckley & Rugby and Leek United building societies entering the market. Specialist lender Masthaven has also started to offer interest-only loans. This increase in lenders may help buck the recent trend away from interest-only. Last month data showed the number of households with interest-only mortgages had fallen dramatically since the financial crisis as lenders shied away from the sector. Interest-only mortgages are loans where the borrower is not required to pay down the overall debt each month, instead they merely pay the interest accrued on the loan. While this makes the monthly payments much cheaper, it means the customer has to pay off the entire cost of the property at the end of the term.
