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Interest-only deals 'a good choice for some'

18th October 2012 | back to article listings BACK    print this article PRINT

Some borrowers can still find interest-only mortgages to be a good choice even though such products are declining, the Council of Mortgage Lenders (CML) said.

Such deals are still on offer to buy-to-let borrowers and could help those who have a definite plan to repay their loans, said the CML.

The Financial Services Authority has planned a clampdown as it only wants to see these deals offered when there is a credible plan to repay the capital. It said borrowers cannot just rely on hopes that house prices will increase.

As a result, lenders have tightened up on such deals. They saw their popularity peak in the late 1980s when they accounted for over four fifths of loans.

In contrast, lenders this year will probably advance 40,000 new interest-only loans for buying homes.

With interest-only deals, borrowers can pay off the capital when their mortgage term ends, enabling them to maximise their borrowing.

Copyright Press Association 2012

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