CML comments on new perpetual mortgage

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CML comments on new perpetual mortgage

Fri 25th Aug 2006

The Council of Mortgage Lenders (CML) has warned that a new mortgage that will allow borrowers to pass on their mortgage repayments to the next generation must be thought through carefully before being taken out.

The mortgage, devised by Kent Reliance building society, allows parents to pay only the interest on their mortgage and defer the actual mortgage payments to their children. It could reduce the payments that parents pay by £150 per month.

Bernard Clarke of the CML, commenting on the new mortgage, said: "It depends on the circumstances. Somebody thinking about taking out this interest only mortgage needs to consider very carefully whether it is suitable for the initial borrower and whether it is sustainable for the person who is to inherit the loan.

"Clearly first time buyers must not lose sight of the fact that they have to pay off capital."

Debt experts have criticised the mortgage by saying that it could lead to a never ending debt that could continue to be passed down to generation after generation and never be paid back.

There are also concerns that the loan will lead to a culture of debt tolerance.

Kent Reliance is the fastest growing building society of the last three years.

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