Are interest only mortgages on the way out?

The Financial Services Authority (FSA) seems determined to push through major changes in the UK mortgage industry which would reduce the perceived risk for mortgage lenders. However, despite the fact that the majority of interest only mortgage holders have had no problem covering their monthly interest payments and final capital repayments it seems that the FSA is determined to stamp out interest only mortgages in the future. So will this really happen?

When you consider the mortgage industry has taken many many years to develop it seems as though the FSA could quite literally throw the sector back to the dark ages with the effective banning of interest only mortgages. The other changes proposed by the FSA would also limit the amount of liquidity forwarded to potential UK property buyers and could in some situations stall the UK property market. There have been recent signs that the FSA might be willing to backtrack slightly and review their proposed mortgage changes but so far there has been nothing official.

If one element of the UK mortgage market is taken away this could have far-reaching consequences for the property market in the UK because fewer buyers means that there is fewer competition for properties and fewer people will actually be able to move home. This is the last thing the UK property market needs!