'Switching to interest-only' decreases repossessions

Date:Monday 17th August 2009
Author: Max Freedman

Repossessions have dropped because people are transferring to interest-only mortgage deals, according to a debt expert.

Ian Boden-Smyth, a money advice coordinator at the UK Insolvency Helpline, commented after the Council of Mortgage Lenders (CML) announced that repossessions were down in the second quarter of this year.

He claimed the current low interest rate meant that people were able to keep up with their repayments more easily if they were on an interest-only mortgage deal, but he warned that the situation may not last.

"What we are worried about is it might just be a sticking plaster and we will see a lot more repossessions once the base rate goes up," he said.

Transferring to an interest-only mortgage deal has allowed people to make savings but Mr Boden-Smyth pointed out that borrowers do not end up paying off their loans through these deals.

The figures from the CML showed that repossessions for the second quarter of 2009 stood at 11,400 compared to 12,700 in the first three months of the year.