More and more people taking out repayment mortgages
It has been revealed recently that the number of repayment mortgages being taken out by property purchasers has reached record levels, having increased steadily since 2007 when they hit their lowest level in six years.
The data comes from Paragon Mortgages’ Financial Adviser Confidence Tracking Index (FACT).
According to the data the number of repayments mortgages for the first three months of this year came in at more than 75 percent having increased from 71 percent in the last three months of last year.
The number of repayment mortgages has increased since the third quarter of 2007, around about the time of the onset of the financial crisis, when it hit the lowest level in six years.
Interest only mortgages have, on the other hand, been decreasing and only 14 percent of mortgages that were introduced in the first quarter of the year were interest only mortgages. A rising number of lenders have been shying away from interest only loans because of the higher risk that they represent.
These mortgages have been very popular with first time buyers in the past because they could keep the monthly repayments down by paying only the interest on the loan for the term of the mortgages. However, this is precisely what also made them higher risk for lenders.
One official said that the decline of the interest only mortgage was already clearly evident and that it was set to continue, with more and more lenders exercising caution over these mortgages.
He said: “FACT shows that residential mortgage lenders have been clamping down on interest-only since the start of the credit crunch and the decline of this market shows no signs of slowing down. The Financial Services Authority signalled the demise of interest-only through changes proposed in the Mortgage Market Review and it appears that lenders are positioning their businesses in anticipation of regulatory changes.”
Paragon data also showed that the number of applications for repayment mortgages was increasing, which indicates that the popularity of these mortgages will continue to rise.
Related posts:
Leave a Reply