Over two-fifths (44%) of mortgage advisers have seen an increase in enquiries about interest-only mortgages in the past year, Opinium has found.

The research and insights agency also found that one in seven (15%) consumers said they would consider taking out an interest-only mortgage in the future.

Opinium found that the most popular reason for this was to lower monthly costs on repayments, with 57% of respondents stating this as the leading factor for choosing the product.

Other reasons included struggling with current mortgage payments (41%), keeping month-to-month housing costs low (41%), and short-term flexibility (31%).

Furthermore, over one in five (21%) said that an interest-only mortgage is attractive as they are planning to downsize, while 17% said that the decision to move to this product was in line with their investment opportunities.

Opinium found that nearly half (49%) of UK adults who are aware of interest-only mortgages said that lower initial monthly payments was the main advantage of the deal. Over a quarter (27%) stated that cash flow was an advantage, followed by 15% seeing it as a change to invest the difference.

However, seven in 10 (71%) advisers are concerned about clients not fully understanding the risks associated with interest-only mortgages, with a further two fifths (41%) worried about clients struggling if their repayment plan underperforms.

The research also found that 19% are anxious about clients paying off more interest and potentially mussing out on potential savings.

Nearly half (47%) of those aware of the product risks stated that they are concerned about negative equity, with two fifths (41%) worried about the potential for higher total interest costs, and limited building of home equity (27%).

Head of financial services research at Opinium, Alexa Nightingale, said: “In today’s challenging economic times, it is perhaps not surprising that interest-only mortgages are more on the radar of homeowners, particularly as they offer lower initial monthly payments and cash flow flexibility. Despite the appeal, it is important to note that not everyone will be eligible for an interest-only mortgage and can be tricky to qualify for.

“On top of this, there is a concern among mortgage advisers that clients do not fully understand the risks involved in taking out an interest-only mortgage, but rather they seem to be interested in the short term benefits this type of mortgage deal can offer, as opposed to considering the potential longer-term risks. As such, it is important for advisers to ensure they are covering all bases in conversations with clients so that they can make well informed decisions.”

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