A brand new research by analysis and insights company Opinium reveals that 71% advisers are involved that purchasers don’t absolutely perceive the dangers related to interest-only mortgages.
In whole, 44% of brokers say they’ve seen a rise in enquiries about interest-only mortgages over the previous yr.
Moreover, related analysis from Opinium discovered that one in seven (15%) customers would think about taking out an interest-only mortgage sooner or later.
The highest three causes purchasers gave brokers for expressing an curiosity in interest-only mortgages got here all the way down to decreasing funds.
The highest reply was attempting to decrease month-to-month prices (57%), combating present mortgage funds (41%), adopted by purchasers attempting to maintain month to month housing prices low (41%).
Total, 31% mentioned it could be for short-term monetary flexibility, whereas one in 5 (21%) say purchasers plan to downsize.
Solely 17% mentioned it was to discover funding alternatives and one other 17% mentioned it was all the way down to a need to get onto the housing ladder.
Nevertheless, regardless of this rise in demand, seven in ten mortgage advisers say they’re involved purchasers don’t absolutely perceive the dangers concerned.
An extra 41% are involved about purchasers struggling if their reimbursement plan underperforms, whereas 19% are frightened about purchasers paying off extra curiosity and doubtlessly lacking out on financial savings.
Opinium head of monetary providers analysis Alexa Nightingale says: “In right this moment’s difficult financial instances, it’s maybe not stunning that interest-only mortgages are extra on the radar of house owners, significantly as they provide decrease preliminary month-to-month funds and money circulation flexibility.
“Regardless of the attraction, you will need to notice that not everybody might be eligible for an interest-only mortgage and might be difficult to qualify for.
“On high of this, there’s a concern amongst mortgage advisers that purchasers don’t absolutely perceive the dangers concerned in taking out an interest-only mortgage, however slightly they appear to be within the quick time period advantages such a mortgage deal can supply, versus contemplating the potential longer-term dangers.
“As such, it is necessary for advisers to make sure they’re masking all bases in conversations with purchasers in order that they will make nicely knowledgeable choices.”
The analysis was carried out utilizing Opinium’s IFA omnibus, the UK’s solely devoted analysis group of IFAs.