Interest only mortgages

Interest only mortgages are fine if you are putting some money away in an investment as well as paying the interest only mortgage so that you can pay off the mortgage when the period expires.

However, there are thousands of people these days that are so desperate to get "on the housing ladder" that they take out an interest only mortgage without allowing any money to pay off the capital lump sum (debt)at the end of the mortgage term. If you can't afford to pay for a repayment mortage or be able to contribute enough to an investment such as an endowment as well as the interest on a mortgage then you are taking some very serious financial risks which could lead you into serious financial difficulty e.g. bankruptcy.

To compound this problem, many people have taken on 2 or 3 year discounted interest only mortgages with artificially low incentive rate which upon expiry revert to the standard variable rate. We have seem exceptionally low interest rates over the last couple of year well below the average long term base rate of around 5%. If you struggle on a discounted interest only mortgage then you should not really be buying a property. It should be a warning to you that all is not well in the economy, and that you should not risk your future by entering into these crippling financial debt arrangements.

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