One-third boost to interest-only mortgages

08 November 2006
The number of consumers opting for interest-only mortgages has risen by a third in the past month, according to research from Mortgages Direct.

In September, interest-only mortgages accounted for 25 per cent of all mortgages, but the figure rose to 34 per cent in October, the survey shows.

The statistics could indicate that Britain's homeowners are in increasingly serious financial straits.

The choice to opt for interest-only mortgages could be a sign of consumers' "bleak outlook on the stability of the housing market", according to Mortgages Direct director Peter Gladdy.

He noted that the interest rate rise in August had made it more difficult than ever for first time buyers to get onto the property ladder.

Mr Gladdy called on the Bank of England to withhold the widely anticipated November rate rise, which "could be a catalyst to a serious downturn in the market", deterring first time buyers.

"If they are unable to buy because of high property prices and the fear of rising interest rates, the market will quickly draw to a halt," he warned.

The majority of financial analysts, however, expect the rate rise to five per cent to go ahead when the bank's monetary policy committee meets later this month.

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