Benefits of interest-only mortgages highlighted

There is nothing particularly risky about interest-only mortgages as long as homebuyers are aware of the risks, an expert says.

Chief operations manager at Alexander Hall Andy Pratt said the fact that more people are taking out this kind of product was not an indication of "extreme" behaviour due to recent mortgage cost increases.

He said young career professionals who expected their incomes to increase significantly might be well placed to make a decision to take out an interest-only mortgage.

If house prices began to fall, however, people might become wary of getting into a negative equity situation.

Recent figures published by the Council of Mortgage Lenders show a six per cent rise in first-time buyers choosing this type of option but not specifying how they would repay the balance.

"I think around a quarter or up to 30 per cent is not an extreme position for the market, and one that will naturally settle somewhere between those two figures," said Mr Pratt.

"It's almost a little bit of a cultural change as well in the way that some people now think."

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