Over two fifths (44 per cent) or mortgage advisers have seen an increase in enquiries about interest-only mortgages over the past year, research from Opinium has revealed.
The research discussed the reasons for this with 57 per cent of respondents saying their desire to lower monthly costs was their reason for considering interest-only mortgages.
This was ahead of struggling with current mortgage payments and trying to keep month to month housing costs low.
Opinium head of financial services, Alex Nightingale, saisd: “In today’s challenging economic times, it is perhaps not surprising that interest-only mortgages are more on the radar of homeowners.”
However, Nightingale additionally warned: “Despite the appeal, it is to note that not everyone will be eligible for an interest-only mortgage and can be tricky to qualify for.”
Looking at what UK adults believe to be the main advantages of an interest-only mortgage deal, 49 per cent of respondents said lower initial monthly payments.
A further 27 per cent said cash flow, and another 15 per cent said they saw it as an opportunity to invest the difference.
However, Nightingale warned that there is a “concern” among mortgage advisers that clients do not fully understand the risks involved in taking out an interest-only mortgage, with 71 per cent of advisers identifying this as an issue.
Instead, they seem to be “interested in the short term benefits this type of mortgage deal can offer, as opposed to considering the potential longer-term risks”, Nightingale explained.
“As such, it is important for advisers to ensure they are covering all bases in conversations with clients so that they can make well informed decisions.”
The research also found a further two fifths (41 per cent) of advisers are concerned about clients struggling if their repayment plan underperforms.
An additional 19 per cent are concerned about clients paying off more interest and potentially missing out on savings.
It comes after the Financial Conduct Authority reported that the total number of interest-only mortgages had halved since 2015 to just under 1mn at the end of 2022.
The FCA also reported that the number of interest-only mortgages still outstanding was 749,524 and for partly-interest-only it was 244,179.
tom.dunstan@ft.com
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