Over two fifths of advisers see increase in demand for interest only mortgages

2nd October 2023

With interest-only mortgages recently discussed as an appealing option for UK borrowers, over two fifths (44%) of mortgage advisers have seen an increase in enquiries about interest-only mortgages over the past year, according to new research from global research and insights agency Opinium.

Additionally, similar research conducted from Opinium among consumers found that one in seven (15%) consumers would consider taking out an interest-only mortgage in the future.

Looking at the reasons for interest in interest-only mortgages, the top three were clients hoping to lower monthly costs (57%), clients struggling with current mortgage payments (41%), followed by clients trying to keep month to month housing costs low (41%). A further one in five (21%) say clients plan to downsize. 

Looking at what UK adults aware of interest-only mortgages believe to be the main advantages of an interest-only mortgage deal, half (49%) said lower initial monthly payments, over a quarter (27%) said cash flow, followed by 15% seeing it as an opportunity to invest the difference. 

However, seven in ten (71%) mortgage advisers are concerned about clients not fully understanding the risks associated with interest-only mortgages, a further two fifths (41%) are concerned about clients struggling if their repayment plan underperforms, and 19% are concerned about clients paying off more interest and potentially missing out on savings

For those aware, the primary concerns differed, with nearly half (47%) concerned about the risk of negative equity, followed by two fifths (41%) who are worried about the potential for higher total interest costs, and limited building of home equity (27%).

Alexa Nightingale, Head of Financial Services research at Opinium said “In today’s challenging economic times, it is perhaps not surprising that interest-only mortgages are more on the radar of homeowners, particularly as they offer lower initial monthly payments and cash flow flexibility. Despite the appeal, it is improtant to note that not everyone will be eligible for an interest-only mortgage and can be tricky to qualify for.”

“On top of this, there is a concern among mortgage advisers that clients do not fully understand the risks involved in taking out an interest-only mortgage, but rather they seem to be interested in the short term benefits this type of mortgage deal can offer, as opposed to considering the potential longer-term risks. As such, it is important for advisers to ensure they are covering all bases in conversations with clients so that they can make well informed decisions.”

Top reasons clients are interested in interest-only mortgages
Lower monthly costs 57%
Struggling with current mortgage payments 41%
Keep month to month housing costs low 41%
Short term financial flexibility 31%
Plan to downsize 21%
Investment opportunities 17%
Desire to get on the housing ladder 17%