Mortgages on the market at present have been somewhat limited due to the financial impacts of COVID-19. However, as the property market begins to get back on its feet, and lockdown is slowly eased, there is one arrangement which could suit future homeowners. A recent study has found interest-only mortgages are likely to surge post-lockdown, as people attempt to manage their finances.
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Interest-only mortgages allow homeowners to pay only the interest charged each month for the term of the loan.
They would not be required to repay the amount they have borrowed until the end of the term.
This could help those who have found themselves struggling amid the coronavirus pandemic, and who need additional financial support.
The research, carried out by Moneyfacts, showed 61 percent of all mortgage deals now have an interest-only option.
This was an increase from the 48 percent of deals with this option in March 2020.
The survey showed interest-only mortgages are likely to significantly reduce mortgage payments, helping those who need it most.
Such a deal was popular before lockdown commenced, but could be even more suitable now the financial impacts of the virus have revealed themselves.
Rachel Springall, finance expert at MoneyFacts commented on the findings.
She said: “Borrowers may well be seeking ways to reduce their monthly expenses, and an interest-only mortgage could do just that.
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“However, it is usually required for there to be a credible repayment plan in place which can entail additional monthly costs or outgoings.”
For those considering such an agreement then, it is important to analyse whether the deal is suitable for personal circumstances.
They may also choose to take independent financial advice to cement their decision.
It is also worth noting interest-only mortgages are usually best suited to short-term circumstances, as the loan needs to be repaid at the end of the term.
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The property market is still dealing with the financial implications of coronavirus.
Many have chosen to temporarily pull higher loan-to-value products off the market, meaning Britons will be required to stump up higher deposits to secure a loan.
The market was essentially placed on pause for several weeks after lockdown measures were introduced.
However, slowly but surely, mortgage brokers, companies and buyers are returning to a new normal.
The English property market was the first to reopen, with Housing Secretary Robert Jenrick stating it was vital to do so.
He commented: “Our clear plan will enable people to move home safely, covering each aspect of the sales and letting process, from viewings to removals.
“This critical industry can now safely move forward, and those waiting patiently to move can now do so.”
Wales, Scotland and Northern Ireland have now also opened their markets, with different rules and regulations in place.
Mortgage payment holidays are also in place for those who are struggling to meet their monthly requirements.
However, when resuming a mortgage, payments are likely to be higher to recoup the costs missed during the break.
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