I have an interest-only mortgage which I took out a number of years ago. As you can imagine with the cut in interest rates my monthly payments have fallen from £900 a month to just over £200. But I've been reading about how lenders are pulling all their interest-only deals and am worried that we might be forced off ours onto a repayment mortgage. Can they do that? Or is there anyway to stop them?
My response:
The headlines you refer to relate to new borrowers or existing borrowers looking to remortgage. So no you can't be forced to move off your interest-only mortgage, as long as you stick to the terms of your deal. But if you want to borrow any more money or move house then there is no guarantee that any associated mortgage will be on interest-only terms.
You don't say who your mortgage is with and I'm guessing that you are on the lender's standard variable rate (SVR) now. So a word of warning, depending on your mortgage deal and its associated small print your lender may be able to increase their SVR despite the Bank of England Base Rate, which it will reference to, not moving.
In addition, at some point the Base Rate will have to normalise from its artificially low rate, currently 0.5%. In both instances your monthly mortgage payment will go up. So your cheap mortgage won't last forever and you will have to repay it in full at the end of your mortgage term, given that you are on an interest-only deal. Do you have a credible plan to repay the debt? I'd argue that simply banking on your house to soar in value and then downsizing is not a safe plan. Do you really want to be downsizing at a time when you are likely to retire and have more time to enjoy your life and home?
If you don't have a credible plan of how to repay your mortgage then you should speak to a financial adviser.
I hope that helps
Best Wishes
Damien
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