Thousands of borrowers switch to interest-only
Up to 300,000 home owners switched their mortgages to interest-only from capital repayment to lower their monthly payments, figures from the Financial Services Authority (FSA) reveal.
The FSA's data shows that since the financial crisis started in late 2007 borrowers have switched more than £60 billion of mortgages on capital repayment loans to interest-only.
Lenders generally allow their customers to switch if they pay an administration charge, providing that they have at least 25% equity in the property.
Banks and building societies have tightened up considerably on their lending criteria and there are very few lenders keen to lend over 75% loan to value on interest-only. Lloyds Banking Group now require borrowers to prove that they have a repayment plan in place before they offer an interest-only mortgage.
June 3, 2011
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