Abstract
Overview
Introduction
Interest-only mortgages are currently a great source of industry and media
attention. Indeed, interest-only mortgages have become increasingly popular,
yet they pose a number of risks to both customers and lenders. What can
lenders and intermediaries do to reduce the possibility of problems emerging
in the future?
Scope
- Provides data on the extent to which interest-only loans account for in
the mortgage market and forecasts their proportion up to 2010.
- Discusses the benefits and risks of interest-only mortgages for both
customers and lenders.
- Provides insight into how lenders can reduce their exposure to potential
future problems.
- Incorporates primary interviews from industry experts and secondary data
from a wide range of sources.
Report Highlights
Over the last few years, interest-only mortgages have continued to increase in
popularity. Indeed, in Q1 2005 interest-only mortgages accounted for 14.9 per
cent of all new mortgages taken out during the quarter; by the end of Q2 2006
they accounted for 25.1 per cent.
Complaints on interest-only mortgages are increasing, but they are still on a
very small scale. The Financial Ombudsman Service (FOS) has stated that it
receives around 300 complaints on interest-only mortgages a year.
Lenders and intermediaries can and should do more to tackle current problems
with interest-only mortgages. These steps include contacting customers on a
yearly basis, making sure the customer understands the risks and the need to
set up a repayment vehicle, and examining their mortgage selling processes,
among others.
Reasons to Purchase
- Plan your strategy with confidence using Datamonitor' s forecasts of the
proportion of interest-only mortgages as a repayment vehicle up to 2010.
- Evaluate the risk of interest-only mortgages and understand what steps
your business can take to reduce its exposure.
- Identify current best practice in the industry, and what other steps
lenders are likely to take.
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