Interest only no more

I feel it is just a matter of time before interest only mortgages are phased out altogether (for residential mortgages, not buy to lets) which is a terrible restriction on our freedom to manage our finances.

Fair enough for high Loan To Value (LTV) mortgagees, where building up some equity is important and the benefits of repaying capital and taking the LTV down from 90 to 85, then 80 etc. gives improving mortgage choice/rates and the comfort of assets greater than liabilities.

But to apply the same rules to someone with a house worth £400k and a mortgage of £200k, perhaps with a mortgage at less than 3%, who has a well-managed, diversified investment portfolio, making regular contributions with regular reviews, hoping to return 8-10%pa, seems very harsh.

It’s the nanny state again, a massive over-reaction to the credit crunch. It assumes that no one is capable of deciding how they want to manage their finances to repay their mortgage debt.

Using investments is a viable means of repaying debts, provided it is done in the right way and the risk is properly understood and mitigated wherever possible.

I just hope interest only creeps back in when the dust settles.