Searches for interest-only mortgages have seen a “notable spike” following the announcement of the mortgage charter, research from Legal & General Ignite has revealed.
The research found there had been an 11 per cent increase in searches for interest-only mortgages from June to July and a 53 per cent increase from May to June.
Legal & General suggested this spike coincided with the announcement of the mortgage charter by the chancellor of the Exchequer, Jeremy Hunt, on June 26.
Under the mortgage charter, borrowers can contact their lender to discuss alternative options without it affecting their credit score.
These options include switching rates up to six months ahead of their current rate expiring and opting to only pay the interest due for a six-month period.
Jodie White, head of mortgage products and transformation at Legal & General Technology, commented: “The uptick in searches for interest-only mortgages certainly characterised July and can be linked to the announcement of the mortgage charter the month prior.
“Borrowers are leaning on this support as the market continues to grapple with the new interest rate environment and wider cost-of-living pressure.”
It comes after the Financial Conduct Authority reported that the total number of interest-only mortgages had halved since 2015 to just under 1mn at the end of 2022.
The FCA also reported that the number of interest-only mortgages still outstanding was 749,524 and for partly-interest-only it was 244,179.
Additional discoveries
Elsewhere, Legal & General’s research revealed that searches for non-traditional construction properties grew by 9 per cent in July.
Searches for mortgage products that consider a property’s EPC ratings also increased over July, “soaring” by 38 per cent (this followed a 15 per cent rise in June).
Legal & General suggested that this growing interest could be an indication of the “increasing influence of the green agenda”, as well as the “heightened” focus on household bills amidst the ongoing cost-of-living crisis.
The research also reported that searches on behalf of borrowers seeking the lowest minimum loan amount increased by 35 per cent, with some seeking cheaper “first-stepper” properties due to rising interest rates.
Additionally, the July data confirmed “visa” remained as the most popular criteria used by advisers searching on behalf of clients, a position it has held since October.
tom.dunstan@ft.com
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