Is the UK sitting on a ticking mortgage timebomb?

[Nicholas Wallwork]

As UK base rates remain at 0.5% for the sixth year it is sometimes difficult to remember the traditional base rate cycle of years gone by. Over the last one hundred years UK base rates have peaked at around 17% and been as low as 0.5% which is where we find ourselves today. Many will [...]

Click to Read The Full Story and Add your Own Comments to Is the UK sitting on a ticking mortgage timebomb?

 

[AndrewJoseph]

Interest-only mortgages allow borrowers to pay just interest during the term but then they must clear the full debt when the mortgage term ends.

 

[Barny]

Interest-only mortgages allow borrowers to pay just interest during the term but then they must clear the full debt when the mortgage term ends.

To be honest, there are very few people who have interest only mortgages that would look to pay off the balance at the end of the term. Interest only mortgages are ideal for buy to let investors looking to maximise income with a lower monthly mortgage but would sell the property at a convenient time when prices increase, they want to withdraw equity, etc. Again, interest only mortgages are good for first time buyers are those looking to get on the housing ladder and ideal scenario for them would be to have a property that increases in value.

Saying that, I've just re-read this article and there isn't actually any mention of anything specific to do with interest only mortgages, just mortgages in general.

This article is aimed at highlighting the risk people are facing with the increase in interest rate and the effect it could have on the country if the interest rates were to increase quickly or to levels that they have been before, in that the affordability may become a struggle if the borrowers don't consider these potential increases.