Recent research from xit2 found that over a million interest-only mortgage holders currently have no final repayment plans in place.
The study estimated that around £116bn of these mortgages would mature between now and 2020.
Our poll asked brokers if these reports had deterred them from recommending interest-only products to borrowers, with 24% responding that too many people were facing problems with these products and that they would try to offer other mortgages.
The majority of respondents (63%) said they would only advise interest-only deals to clients who fully understood the demands of the product, with the remaining 13% adding that their position on interest-only had not changed.
The statistics sparked debate in the Mortgage Solutions comments section with broker Andy Wilson asking what lenders’ plans were for these mortgages: “It would be of great help to customers and brokers alike if some research could be published as to the stance lenders will take when presented with a mortgage loan coming to the end of its normal term, on an interest basis where there is no repayment vehicle in place.
“Will they seek repossession? Will they extend the term? Will they treat customers fairly and engage with them to consider a repayment solution? Will they give them reasonable time to keep repaying interest only on a longer term basis? Or insist on a sale? If I am to properly advise clients in this situation I could do with knowing lenders’ views now.”
Fellow reader Mike Snorkins commented: “The current FSA/compliance landscape means I would prefer to only recommend repayment mortgages – easy life.
“However, for the right type of client (financially sophisticated, higher risk attitude etc.) interest only can still be appropriate advice, especially when combined with an overpayment plan.
“This is particularly appealing to self-employed clients with fluctuating income. This could be deemed as ‘best’ advice, but recommending is another matter.”
Arron Bardoe added: “Sadly, this is endowment mortgages all over again.
“Where endowment was OK for a small proportion of borrowers, it was sold to the majority through financial incentives. As with IO, too many people have these and, while at the time of purchase understood them, have now put this concern to the back of their mind.
“Most IO borrowers could have afforded full repayment on purchase, but were persuaded IO was cheaper – not in the long run by any calculation.”
