Homeowners with interest-only mortgages 'heading for disaster'

Published 19th Mar 2008

People with interest-only mortgages could be in trouble if house prices continue to slide
Thousands of homeowners with interest-only mortgages could be heading for 'disaster', a report warned yesterday.

Soaring numbers of cash-strapped homeowners are switching to these cheaper types of loans in a desperate bid to save money.

But the report fears many are simply "storing up problems for the future."

Interest-only mortgages are much cheaper because the homeowner only pays the interest on the loan every month - but not a penny of the actual loan.

They are meant to save money each money, typically into an Individual Savings Account, which they will use to pay off, or pay down, the loan at the end.

But many are failing to save money, which means they face paying hundreds of thousands of pounds in interest, without owning a single brick of their home.

The warning comes as Michael Coogan, director general of the Council of Mortgage Lenders, said the days of very cheap mortgages could be over.

By BECKY BARROW

Source: ' Daily Mail '

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