Interest only mortgages

Interest only mortgages are loans against a property where the capital is not repaid, just the interest. Therefore the value of the loan never reduces. Most interest only mortgages do not have a time limit like normal mortgages that are usually repaid over 25 years, but the borrower continues to repay the interest until they are in a position to repay the capital.

In recent years interest only mortgages have become more popular as first time buyers have struggled to afford a repayment mortgage. The thinking behind this is that the property will rise in value and when the homeowner sells the property they can use the profit from the sale to put down a decent deposit and be able to get a repayment mortgage. There is an element of risk in doing this because property values can go down as well as up over the short to medium term.

	HSBC and Yorkshire BS pull out of interest-only mortgages HSBC and the Yorkshire Building Society have followed Nationwide and the Co-operative Group in pulling out of the residential interest-only mortgage market.
	Nationwide pulls interest-only mortgages for new borrowing The Nationwide Building Society has announced that it will pull interest-only mortgages for new customers but the decision will not affect existing customers.
	Will interest-only mortgages become the next mis-selling scandal? Nationwide's decision to pull interest-only mortgages could mean that they become a niche product only offered by private banks.
	FCA warns on interest-only mortgage "ticking timebomb" New research from the Financial Conduct Authority has found that 37 per cent of people with an interest-only mortgage believe they have a shortfall in repaying the capital.
	The decline of interest-only mortgages Figures from the Council of Mortgage Lenders (CML) show interest-only mortgages accounted for just four per cent of first-time buyer mortgages in March 2011, down from a high of 30 per cent in 2007. Kate Saines explains why they are falling in popularity.