The findings show the majority of intermediaries questioned believed the sale of a property is sufficient as a repayment vehicle and that lenders should not ask borrowers for further proof of repayment capability.
31 per cent of brokers said their clients had requested an interest only mortgage,while 66 per cent of intermediaries felt the sale of the property was appropriate to put down as a repayment vehicle. 86 per cent of intermediaries thought lenders should not ask for proof of a repayment vehicle if the borrower chose an interest only mortgage deal.
David Copland, Pink’s sales and marketing director, commented: “It is up to intermediaries to advise on whether an interest only mortgage is better than a repayment mortgage for a client, but they do need to stay in touch with those clients every couple of years and pose the question – how are you going to pay of the debt on the mortgage or are you in a better financial position to revert to a repayment mortgage?”
Phil Perry, director at Ark Financial Planning, commented: “There is a lot of talk about interest only mortgages being the next mis-selling scandal, with concerns that borrowers take them on without professional advice and with no repayment vehicle in place. I think there is always an argument for interest only mortgages, providing the borrower has the means of repaying the debt at a later date and they are advised that at some stage they will have to repay the mortgage loan.
“Borrowers should be aware of the need to create a fund to repay the loan and not rely solely on the sale of the property at a later date. They must be made fully aware of exactly what they are getting into with an interest only mortgage deal.”
