Interest Only Vs Fixed Rate Mortgages

Interest only mortgage deals have declined to 23% of all mortgages sold between July and September 2008 according to a survey of more than 200 financial advisers conducted by Paragon Mortgage. The comparable figure for the first quarter of 2008 was 26%, which was down from the last quarter of 2007. The last time that interest only mortgages fell before this quarter was in the first three months of 2004.

On the other hand repayment mortgages have shown a rise following years of decline. They made up 60% of mortgages sold in the third quarter. The proportion of repayment mortgages has fallen steadily since they peaked during the last three months of 2001 at 70%. The reason for borrowers choosing fixed rate loan deals appears to be a perception that this type of long term loan offers security.

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