Freelance workers who work for umbrella companies and limited companies are now discovering that interest only mortgages are almost impossible as the sentiments of lenders move in the direction of more rigid repayment loans. This is according to the founder of independent financial and mortgage contractor advisor Contractor Money, Tony Harris.
Over the course of just the last week one of the few remaining contractor-friendly lenders has pulled the plug on all future applications where the sale of the property or ad hoc capital repayments were to be the only means of settling the mortgage debt.
Financial regulators the FSA effectively declared war on interest only loans amidst fears that borrowers were over-committing themselves financially. Mortgage firms have run scared as a response to the FSA warning that it will be taking a dim view of such lending, with a perfectly legitimate kind of mortgage borrowing now looking as though it will become a thing of the past.
The FSA’s knee-jerk reaction came in response to criticism that it had been too lax prior to the 2008 credit crunch and now wants to be seen as promoting ‘responsible lending’, but it will be contractors who will suffer as a result of this policy change because of the reality that interest only mortgages were the ideal way for contractors to be able to cope with the highs and lows of income inherent in the profession. The FSA is now bleating that it did not intend for interest only mortgages to entirely disappear, but it would appear to be too little too late.