There has been a rise in advisers searching for interest-only mortgages during lockdown, according to Legal & General Mortgage Club.
The firm found a significant increase in the number of advisers searching for criteria around interest-only products between April and May.
The criteria search combination for ‘interest-only’, ‘maximum age for interest-only’ and ‘minimum income’ was the third most searched for topic in May, up from sixth place in April.
Legal & General Mortgage Club said while an increase in adviser searches last month would have been influenced by the reopening of the housing market in England on May 13, the data showed that weekly searches for interest-only product criteria were already starting to rise before lockdown eased.
The mortgage club added that searches for interest-only products had become the third highest search by advisers in the first week of May, after just a few enquiries in the same week of April.
It said this could indicate that advisers had been suggesting interest-only products as an alternative solution for clients facing difficulties due to the coronavirus.
Kevin Roberts, director at Legal & General Mortgage Club, said: “Our data shows that advisers are already thinking outside the box and searching for new options for borrowers who are on or considering payment holidays, that can help them to manage their monthly mortgage repayments”.
Carl Shave, director at Just Mortgage Brokers, commented: “At Just Mortgage Brokers our prime audience is those that require a more specialist approach such as interest-only and adverse credit issues, and the data mirrors our own experiences in a noticeable increase in enquiries in these sectors.
“These unprecedented times are highlighting the importance of good advice, and certainly where interest-only is concerned advisers and borrowers alike need to address not only the benefits and possible risks right now but also for the future.
“Interest-only comes with no guarantees of availability in the future and should not be seen as just a quick fix where future lack of choice may create larger issues for the borrower.”
Last year a survey of financial advisers found that interest-only mortgages remained popular.
The products had risen in popularity in the run-up to the financial crisis in 2008, but there were concerns the products were enabling customers to purchase otherwise unaffordable properties, which led in part to the introduction of tougher checks around affordability and repayment plans as part of the Mortgage Market Review in 2014.
At the start of 2018 the Financial Conduct Authority reported nearly one in five mortgage customers had an interest-only mortgage and stressed it was concerned that shortfalls in repayment plans could lead to people losing their homes.
Many interest-only borrowers are also classed as mortgage prisoners because they found themselves trapped in their policies after the financial crisis as banks were less keen to take such customers on.
The new rules brought in by the MMR had made it harder still for clients to switch to newer products as it imposed tougher affordability criteria on borrowers many were not able to meet.