My Mortgage Direct claimed that borrowers faced possible financial disaster by switching from cheap fixed rate deals to short-term interest only mortgages.
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Pointing to the four rises in interest rates over the past year and an anticipated rise at the next review, the My Mortgage Direct indicated that repayments had continued to rise as fixed rate deals ended and other options had been sought.
Cath Hearnden, director at My Mortgage Direct, said: “We are seeing increasing numbers of borrowers who, rather than face reality, are using an interest only remortgage as a form of defence against the onslaught of rising repayments until the cavalry arrives.
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“It’s easy to see the attractions of the interest only escape route. But there are ways of mitigating the effects of rising costs. We are advising clients who feel this is a necessary course of action that they could compromise by opting for part interest only and part repayment to keep the repayments the same.”
Paul White, consultant at Belgravia, commented: “It depends on what they want to do. If they can only afford the interest on a part repayment they will struggle and the possibility of downsizing of living in an equivalent property will be faced.”
