Interest-only mortgages declining

Fewer lenders are offering buyers interest-only mortgage deals, with Coventry Building Society being the latest to withdraw its offering from the market.

It is estimated that over a million buyers signed up to interest-only mortgages between 2005 and 2009, with the majority being sold alongside a repayment vehicle such as an endowment policy or Isa.

However, financial watchdogs have expressed concerns that many people have no means of repaying the capital and risk losing their home at the end of their mortgage term.

As such, many lenders are trying to switch people to repayment deals, where capital is gradually repaid over the term. However, this would mean some people's monthly payments rise significantly.

Melanie Bien, a director of Private Finance, told the Daily Telegraph: "Repayment mortgages offer more security than interest-only deals, but forcing everyone on to one, regardless of their circumstances, is not realistic."

Coventry Building Society has scrapped its interest-only deals for first-time buyers and will no longer offer the deals for loans over £500,000.

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2010-08-13 10:04:21 © Moneyextra.com