An interest-only mortgage application should be assessed as though it is a capital-and-interest deal, unless there is a "believable" strategy for repaying the loan that does not rely on house price inflation, the Financial Services Authority (FSA) has...
Overall lending for house purchases hit its highest level in almost a year in July, according to the latest figures from the Council of Mortgage Lenders (CML).
Up to 300,000 households have moved more than £60bn of mortgage debt from repayment into interest-only deals over the past three years, according to FSA data.
Continuing restrictions threaten the product's existence
Nationwide Building Society has announced it is to restrict the maximum LTV of its interest-only mortgages to 75%.
The FSA this week moved to allay fears interest-only deals will disappear from the market, saying it remains a "sensible" option for some consumers.
Lloyds Banking Group (LBG) is further tightening the criteria it applies to its Halifax-branded interest-only mortgages and scrapping them completely on homeloans over £500,000.
Abbey has tightened its lending criteria for interest-only mortgages by reducing the maximum loans available on such deals.
Mortgage lenders should regularly review customers with interest-only mortgages to prevent them losing their homes when they reach retirement, according to Moneynet.co.uk.
Borrowers are taking long-term risks for short-term gains by switching to interest-only mortgages as cheap fixed rate deals come to an end, according to My Mortgage Direct.