If you have an interest only mortgage now could be the time to consider switching product before the window closes.
In the last two weeks both Natwest and Coventry Building Society ceased offering interest only mortgages for residential property following on from Nationwide’s decision to do the same some time ago.
Add to this the vast number of lenders who have restricted interest only borrowing to less than 75%, 66% or even 50% of the property value and the market for these mortgages is now stricter than ever.
Borrowers on interest only mortgages currently sitting on their lenders variable rate should consider changing their mortgage to a new product now before the market contracts further.
With the FSA’s announcement that interest only lending would become part of their mortgage market review following the credit crunch many lenders have reacted in a kneejerk fashion eliminating the option for customers with a suitable repayment strategy to refinance their loan regardless of the plausibility of their circumstances.
This is already creating a large number of mortgage “refugees” unable simply due to lenders criteria to arrange a new mortgage and who then become trapped on a variable rate without the option to move.
Whilst this may not be the end of the world whilst the Bank of England Base Rate is low it could result in thousands more repossessions in the event of the collapse of the Euro.
This scenario would almost certainly see wholesale increases in lenders standard variable rates which many borrowers might find too large to handle.
For those in the last years of an interest only mortgage or perhaps even half way through with a borrowing of more than 50% of their properties value waiting too long to consider a move to a new product could see them shut out of the market in the long term.
Of course for those borrowers without a suitable strategy for repaying an interest only loan then this should be the right time to think about switching either to a full repayment mortgage or if investment’s such as endowments are not performing and predicted to fall short of requirements whether a part repayment and part interest only loan could be suitable.
For more information contact one of our whole of market advisors on 0845 4594490