Interest only mortgage customers under pressure
In the boom times it seems that more and more people gambled their futures by investing in interest only mortgage arrangements which effectively deferred repayment of capital and reduced their monthly mortgage payments. Figures from the Financial Services Authority indicate that upwards of 4 million households in the UK will be unable to move from their current homes for many years to come. Apparently the reduction in property prices will scupper their plans to pay off their original loan capital by selling their home (and banking a large profit) before moving to new a property.
Those who chose capital and interest repayment mortgages were often ridiculed as oversensitive and overcautious although these are the people who have been paying back and reducing their original loan capital on an ongoing basis. As a consequence, they will have significantly more equity tied up in their homes which should give them more of a cushion between what they owe and the value of their property (even after the recent fall).
While there is no suggestion that anybody was mis-sold their interest only mortgages, the fact remains that many people automatically assumed these were the best option although unfortunately may well live to pay the price. In the boom times the sky was the limit and in the economic downfall many are on the edge of a precipice!
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