OpinionMay 22 2013

In the right hands these products are fine

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Research suggests that (thankfully) only 2.5 per cent of people with interest-only mortgages did not realise they needed a repayment vehicle (or the ‘ostrich’ repayment plan).

The example used of someone with a £300,000 mortgage in the south east with no plans in place to repay in five years is indicative of the live-now-pay-later mentality that has contributed to the nation’s debt.

Without knowing the full circumstances of the case, in order to borrow £300,000 – even on, say, a 4x multiple would have needed a substantial income of £75,000 some 17 years ago and presumably the wherewithal to overpay in the future.

Personally, I am quite happy with my interest-only mortgage on 1.49 per cent and intend to redeem it when interest rates exceed the net returns on my savings (4.25 per cent).

Mike Smith

Managing director

Mike Smith Compliance Services

Dunstable, Bedfordshire