According to its bi-annual report, the number of people taking out interest only mortgages has seen a steady rise over the last five years, from less than 10 per cent of cases in 2001 to over 25 per cent now. In fact the proportion has grown from 20 per cent to 25 per cent since 2005.
John Heron, managing director of Paragon Mortgages, said: “Over the last 10 years we have seen a significant rise in the number of people who are opting for interest only mortgages as opposed to other repayment methods.
“Interest only mortgages are common among portfolio buy-to-let investors who can refinance the mortgage or have the option to sell in order to repay the loan. For the owner occupier the choice is more critical as the family home can not be readily sold to repay the mortgage. Clearly financial advisers play a key role in ensuring that mortgage holders who select an interest only loan secure a suitable means by which to repay the loan at maturity.
“In many cases borrowers may be choosing interest only for a limited time, but it is important that they give this choice careful thought.”
