Interest-only mortgage borrowers advised to act

People with interest-only mortgages have been advised to consider switching to a repayment mortgage as soon as they can.

Millions of people have taken out interest-only mortgages in recent years in order to benefit from lower monthly payments that allowed them to buy a more expensive house.

Many of them did not put into place arrangements to repay the capital, as they believed the value of their property would rise and allow them to pay off the loan.

However, house prices have plummeted since the peak of autumn 2007 and some homeowners with interest-only mortgages are now in a position where their property is worth less than they owe.

With analysts predicting that house prices will not return to 2007’s levels for a number of years, David Hollingworth of broker London & Country said the situation will get worse for those borrowers unless they act now.

He told the Daily Mail: “If you are on interest only the best thing you can do is switch to repayment. But if you can’t afford to do this then you should either overpay on your current deal or start regular saving.”

The advice was echoed by Julian Knight of the Independent on Sunday, who added that interest-only mortgages are a bad idea for most people.

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