Thursday 27th March 2008
For those who cannot afford to repay the capital loaned to them in the form of a mortgage, an interest-only deal might be a "rational" alternative.
Such is the assertion of Bernard Clarke, communications manager for the Council of Mortgage Lenders (CML).
He explains that data obtained by the CML indicates a broad trend towards an increasing number of interest-only mortgages being held among consumers.
But he adds that this may include mortgages where the lender is unaware of how the individual plans to repay the capital initially borrowed in their mortgage.
Despite this, Mr Clarke contends that interest-only mortgages can be acceptable "as long as the borrower is fully aware of the consequences".
These include a need to eventually move over to a repayment plan to ensure there is no outstanding capital by the end of the mortgage term.
He concludes that capital may be repaid over the life of the mortgage, or a savings scheme used to generate an equivalent sum over the full term.
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