Month: March 2019

Revisiting Interest-Only Mortgages

Interest-only mortgages have been used for some time to give clients a way of affording properties that are more appropriate for the requirements of themselves and their families. However, as has always been the case, due consideration should be given to the intended method of mortgage repayment. The consideration of an individual’s ability to repay […]

ISAs

Even though they do not of course attract tax relief on contributions, ISAs are still popular. The maximum ISA contribution remains unchanged at £20,000. This could be directed solely into a cash, investment or innovative finance ISA, or split across them. The last of these has been available since 2016, and we are now seeing […]

Personal Allowances and Savings

The increase in the personal allowance to £12,500, as well as the widening of the income band charged at basic rate tax by £3,000, means that higher rate tax is now not charged until taxable income reaches £50,000 (note that rates for Scotland differ slightly). Whilst the basic rate tax band has been widened by […]

Preparing for a New Tax Year

The end of the 2018/19 tax year is now less than one month away. While there may still be time to act on certain measures to optimise the use of HMRC-approved tax breaks and reduce personal tax liabilities for 2018/19, this article looks ahead to the position for the new 2019/20 tax year. We have […]

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Revisiting Interest-Only Mortgages

Interest-only mortgages have been used for some time to give clients a way of affording properties that are more appropriate for the requirements of
themselves and their families. However, as has always been the case, due consideration should be given to the intended method of mortgage repayment. The consideration of an individual’s ability to repay a mortgage was tightened five years ago in 2014 as part of the FCA Mortgage Market Review. However, Which? has reported that work carried out by Experian for the then FSA (now FCA) in 2013 indicated that there would be 81,400 interest-only mortgages (worth £9.2bn) maturing in 2019 and 82,100 (worth £9.7bn) in 2020, with further expected peaks in 2027-28 and 2032. Although the market is seeing the greater use of equity release and the introduction of products such as retirement interest only mortgages, these are unlikely to be suitable for everyone. They will still carry understandable lending restrictions, meaning that some clients will be unable to escape the need to sell their homes. Interest-only mortgage clients who are still five years or – better – 10 years from the maturity of their mortgages, may be able to find a way of overcoming this issue. However, this is very likely to substantially increase their monthly savings commitments. The media is reporting increasing cases of eviction being brought by leading lenders, and it is therefore important for clients to have a clear exit plan if they currently have an interest-only mortgage.