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Should it be mandatory to have an investment vehicle in place to pay off the capital at the end of an interest-only deal and do you think it should be illegal if there is not one in place? Frank Jurga, Swindon Mortgage Services, Swindon

Evan Owen, IFA Defence Union, Gwynedd, Wales

Dear Frank,

It is not illegal but I have two conflicting opinions that are difficult to balance.

If a lender insists on a borrower having a repayment vehicle then we all know where we stand. When it allows a borrower to proceed without any specific arrangements, as many have done, it places the legal onus on the adviser.

I take the general view we are all adults and should be allowed to do whatever we want so long as, individually, we are prepared to face the consequences of our chosen course of action.

If a client said: "I want to buy that house but can only afford it on an interest-only basis", why should he be protected from himself?

It may all go pear-shaped and if so that is real life for you. If clients had done this in the 1980s they would have been able to afford the property they wanted in one jump rather than hopping up the ladder one rung at a time.

I would feel hard done by if the FSA galloped in telling us interest-only clients had not been treated fairly as they cannot repay the loan when it was their choice.

As with all financial matters the adviser's enemies must accept adults are free to do what they wish so long as it is not illegal. The matter for the adviser to be wary of is the cunning complainant who protests in years to come that he would have "done things differently" if he had known.

Peter Bristow, Financial Ombudsman Service, London

Dear Frank,

Occasionally, a consumer will approach a mortgage intermediary and request an interest-only mortgage without an investment vehicle to repay the capital. While this is not illegal, the adviser should highlight the risks associated with this course of action.

The FSA's Mortgage Conduct of Business rules state an adviser should ensure the suitability of their advice and take reasonable steps to obtain all information from a consumer that is likely to be relevant.

Not only is this important in enabling the adviser to give appropriate advice, but keeping accurate records of the information considered could also be useful in the unlikely event of a complaint.

When assessing a consumer's financial situation, it sometimes becomes apparent they have unrealistic expectations of how they will pay off their mortgage.

They may think the capital will be covered by income from letting the property, a rise in property values or even a windfall. In these circumstances, an adviser may decide not to proceed with the application.

The Financial Ombudsman Service has started to see an increase in mortgage complaints including those relating to affordability issues. If you are a business that has received a mortgage or credit-related complaint and are unsure how to resolve it, you can contact the Financial Ombudsman Service's technical advice desk.

The advice desk gives informal advice on specific enquiries and can explain the ombudsman service's process and approach.

Brian Murphy, Mortgage Advice Bureau, Derby

Dear Frank,

Interest-only mortgages have become a popular option for borrowers in recent months as the monthly payments only cover the interest on the loan and are therefore more preferable due to affordability issues.

For interest-only mortgages it is not illegal to not have an investment vehicle in place to pay off capital at the end of the deal.

However, it is important to highlight interest-only mortgages are not suitable options for all borrowers. Those on static fixed incomes who are unlikely to see a significant uplift in the future are better off steering clear of interest-only mortgage deals.

These deals will, at some point, require a conversion to a repayment mortgage or using a repayment vehicle in order to pay off the outstanding mortgage debt at the end of the term.

Interest-only mortgages can provide the only access point into the market for some borrowers and can thus be preferable in certain circumstances, especially for borrowers who are looking to downsize or are expecting a large windfall.

Borrowers in certain areas of the country, such as London and the south east, may also find an interest-only mortgage can be a viable option as it can be cheaper than renting and allows borrowers to step onto the property ladder.

Interest-only mortgages are also popular with a lot of buy-to-let landlords who have exit strategies and can move to a repayment mortgage in the future.

It should not be illegal to not have an investment vehicle in place but borrowers may find it more difficult to obtain an interest-only deal in the current climate as lenders have tightened their eligibility criteria.

Both lenders and advisers have a responsibility to warn borrowers of the risks involved when taking such a mortgage deal.

However those without repayment vehicles and those who are unable to switch to a full repayment mortgage may find most lenders will offer a part repayment, part interest-only loan, which means they are at least paying off some capital.