Warning over interest-only mortgages

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Warning over interest-only mortgages

Thu, 30 Oct 2008

Switching to an interest-only mortgage should be a last resort for those struggling with their payments, according to one expert.

Louise Cuming, head of mortgages at Moneysupermarket.com, explained that although doing this can cut monthly outgoings by £236 on a £150,000 loan, it might not be best for everyone.

This is because those who switch to such a deal will pay more in the long run as they will not being paying of the capital of their mortgage, she stated.

People on an interest-only deal for the first seven years of their loan will pay an extra £18,000 over the course of their mortgage, Ms Cuming pointed out.

She said: "They will also see their monthly repayments leap by £408.40 when they do start repaying the capital, which could put a serious dent in monthly budgets."

For this reason switching to an interest-only mortgage should be a last resort only and other "luxuries" should be cut first, Ms Cuming added.

Yesterday, Moneyfacts.co.uk claimed that first time buyers might want to delay buying a property to take advantage of any future decrease in house prices .

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