If you’re one of the borrowers who took out an interest-only mortgage expecting that the increase in property prices would help you to pay off your loan then the recent drop in house prices may have scuppered your plans.

At the peak of the market buyers turned to interest-only loans as a way of meeting mortgage payments on desirable properties they could not otherwise afford to own.

Others were first-time buyers desperate to get on the property ladder. In 2006 and 2007, more than 30,000 families a month were signing up for interest-only deals. Of these around 20,000 said they had no way of repaying the capital on their loan.

Mortgage Lenders allowed these loans because they too were convinced house prices would keep rising.

Borrowers with interest-only mortgages may find it difficult to move homes because of the erosion of the equity value in their present home.

Be Sociable, Share!

• 

Posted on August 24, 2009 at 11:36 am
http://nevillescott.co.uk/92/interest-only-mortgage-trap/
http://nevillescott.co.uk/92/interest-only-mortgage-trap/trackback/
Categorised under : Mortgage News
Tagged with : Borrowers , Desirable Properties , Equity Value , Erosion , First Time Buyers , House Prices , Interest On The Loan , Interest Only Loans , Interest Only Mortgage , Interest Only Mortgages , Loan Interest , Loan Mortgage , Loan Payments , Mortgage Lenders , Mortgage Payments , Nbsp , Peak Of The Market , Property Ladder , Repayment Mortgage