The Ryan Review

SOMEONE contacted me the other day to say he had “heard something” about a new interest-only mortgage and wondered where he could get one, expressing delight these were being sold again.

With relief (mine, not his), I told him they were only for buy-to-let properties and he wouldn’t be able to avail of one for his new house. He wasn’t comforted by my explanation about why this was a good thing.

The BTL interest-only product is being marketed by ICS, to professional investors on a maximum 70pc loan-to-value basis. There’s nothing wrong with it, and I’m sure it was run past the Central Bank.

That doesn’t mean it shouldn’t be of concern though. It’s a ‘thin end of the wedge’ argument which sees old practices we thought we had done away with, start to creep in again. What next? The 100pc mortgage? Thankfully CBI rules ban that now, but memories are short, and the property market is under pressure and who knows what a future government might decide is ‘best’ for its people.

Interest-only loans are fairly common in other jurisdictions, however, most haven’t faced the utter catastrophe we continue to bear the fallout from.

Is it okay that anyone (even risk-taking investors) repay a loan over 10 or 15 years based solely on a crossed fingers approach to capital growth? BTLs make up a far higher percentage of mortgages in long-term arrears than private homes, so surely an ultra cautious approach is wisest.