The past decade has seen some momentous world events take place. Our brave new world has been beset by terrorism, war, natural disaster and economic meltdown on a scale not seen for many years if at all. Certainly opting for interest only mortgage rates is no longer as desirable an option as it was during the end of the last century. For a while the property market seemed invincible and the old adage of investing in bricks and motor as a guaranteed path to financial security rang very true for many home owners, who could happily forget such concerns in favor of selecting the most desirable home decor.
House prices rose steadily and, for a few years, fairly dramatically and billions were made in property investment. Many home owners lucky enough to buy their home before the boom have seen their homes double in value, and anyone felt they could make good if they could just get a foot on to the property ladder. In a market seemingly so buoyant there seemed little risk involved in getting an interest only mortgage, as the inevitable rise in the price of the house would offset a large part of the debt. Or so everyone thought.
In the eighties greed was good, but warning signs during the following decade that should have prompted a tug on the reins from those with the means to address the economy as a whole. Aside from being a comparatively cheap way to maintain a home loan, the interest only mortgage quickly became the only way many new home owners could get on the property ladder at all, as house prices rose well beyond their means. This growing trend which has left many young house buyers saddled with unassailable debts, and caused many to lose their homes altogether, should have been the warning that the property party was coming to an end.
Such is human nature and, as long as the profits kept rolling in, such obvious warning signs were ignored. So what have we learned? That sooner or later, a debt must be paid back, something many caught in the credit boom are learning the hard way. An interest only mortgage can be a viable option for many, even in today’s insecure economy, but like any loan that could put at risk something as essential as your home, extreme caution is to be advised.
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