The specialist online and telephone mortgage broker has seen the trend rise with over 35 per cent of its clients opting for interest-only deals, up from previous levels of 25 per cent.
Paul Hearnden, managing director at MyMortgageDirect, said: “We have certainly noticed the increase in clients going for interest-only mortgages rather than capital repayment.
This may be down to numerous factors; people coming off record low two-year fixes are tempted by interest-only loans due to lower monthly payments if compared to repayment deals. Other aspects are interest rate rises and high property prices.”
Hearnden expressed his concerns that an increasing number of first-time borrowers are choosing the interest-only route without necessarily thinking ahead and implementing saving plans or other repayment vehicles.
He added: “Borrowers seem to be less willing to compromise certain lifestyle choices and are drawn to the lower payments rather than planning for the longer-term.”
Kate Flanders, regional intermediary sales manager at Skipton Building Society, agreed, she said: “Speaking to brokers there seems to be an increase in the demand for interest-only deals.
“They are being used as a short-term fix for borrowers looking to get on the property ladder.”
The CML has urged such borrowers to take responsibility with recent figures showing that the number of interest-only first time buyer mortgages has crept up by five percent over the last two years.
