Interest-only loan danger

Borrowers with interest-only mortgages could be faced with crippling debts and negative equity in the falling property market, according to new research. Figures from insurer LV show about 41 per cent of homeowners with such loans - about 530,000, owing £30 billion - gambled on rising property values and cashing in equity to pay off loans. But with recent falls in house prices and further declines predicted, the loans are a serious risk. Mike Rogers, chief executive at LV, said: ‘Almost half a million interest-only borrowers could be in negative equity by the end of 2009. The worst-affected will be those who bought close to the peak of the housing boom in the second half of 2007.’