Interest mortgages 'growing in popularity'

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British homeowners are increasingly turning to interest-only mortgages as they shun repayment deals, a new study has found.

According to research conducted by Paragon mortgages, the proportion of broker business made up by interest-only mortgages has risen from 11 per cent to 26 per cent over the last four years.

Conversely, the market share of repayment mortgages has declined from over 70 per cent to just 58 per cent over the same period.

Commenting on the findings, John Heron, managing director of Paragon Mortgages, said: "Repayment mortgages remain the mortgage of choice for owner occupiers.

"The interest-only sector has grown both with house prices and buy-to-let.

"Interest-only mortgages are ideal for buy-to-let investors who benefit by maintaining gearing and at the end of the term, have the choice to either re-finance or sell the investment property back to pay the loan."

The latest figures come as observers widely predict that the Bank of England will further increase interest rates later this year as it seeks to curb inflation.

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