People on interest only mortgages are being warned that they may not be offered another one when their fixed term runs out. If you have less than 25% equity in the house you may have to change to a repayment mortgage which will almost always be more expensive each month. If you are trying to buy your first home you will probably find the mortgage lenders insisting on large deposits for interest only loans- much larger than for repayment mortgages.

Until a few years ago interest only mortgages were very popular with both lenders and borrowers but they are much harder to come by now. There is now a general feeling that borrowers should have a mechanism in place to pay off the loan and not just the interest on it. In the days of rapidly rising house prices many thought they could build up equity simply by waiting for their home to increase in value but this does not apply if prices are static or even falling. Landlord insurance clients hope that the gloomy news about house purchase will boost demand for rentals.

A popular way to save towards paying off the mortgage was to take out an endowment policy and pay into it each month with the expectation that the policy would grow in value and produce a lump sum at the end of the term. However the bad news is that some endowments now coming to their maturity have not performed nearly as well as expected- leaving home owners with a shortfall to make up at the end of their mortgage term.

All of this helps to explain why so many people are renting rather than buying and why buy to let seems to be here to stay.

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