Will there be any interest only mortgages in 5 years time?

gardenlady_2

I am in a quandry. I have posted here before, but the situation is I am on an interest only mortgage with Santander which ends in March, our only option with them is to go on th SVR, 4.79%. We have an endowment which is on track to pay off the mortgage in 11 years time.
My broker has suggested a Leeds mortgage, interest only 3.59% 5 year fix. This is very affordable, but I have started to worry what happens at the end of the 5 years if there are no interest only good rates out there. I have the option now to go on a repayment mortgage- the payments would be £393 a month more than we pay now, but if we both stop paying into our pensions we could just afford this. We would keep the endowment, and then use this to pay the mortgage off in 11 years. However, if I were in the situation of having to go onto a repayment in 5 years I think the monthly payments would be prohibitive.
It would feel quite risky to have to pay more at the moment, but even riskier if our payments go up in 5 years! Thanks.

Jimbo1976

There is currently a big backlash against interest only loans at the moment as lenders have realised that a number of foolish borrowers don't have any way of paying off their mortgages. The latest mortgage market review rules from the FSA have not banned interest only but they do make sure that lenders will only give interest only loans to those people who have some (realistic and plausible) way of paying them off.

beecher2

An option is to work out how much a repayment mortgage would be, and overpay the difference each month. However I think doing this instead of paying into a pension would be a false economy. If you post on Debt Free Wannabee forum you'll get help with budgeting to maybe come up with the extra needed without having to do this.