Interest-only mortgages are a "ticking time bomb"

The number of people taking out interest-only mortgage rates will create a "ticking time bomb" of debt, it has been claimed.

Paul Holmes, chief executive officer of Firstrung, explained that during in the height of the property bubble, people bought houses on interest-only mortgages, expecting house prices to increase and pay off the debt, but that did not happen.

"Unfortunately, the way the economy is being managed, we're headed towards [a situation] where property is not going to increase in value and people are going to be left with debt because they have got an interest-only mortgage. It is a time bomb without a doubt," he explained.

However, he conceded that the issue is mainly confined to the buy-to-let market rather than individual households.

Ray Boulger, senior technical manager at John Charcol, also recently claimed that while 30-year fixed mortgage rates are a good idea to stabilise the housing market, their terms would be impossible for homeowners.

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2011-10-31 15:27:42 © Moneyextra.com