Home Finance Negative interest rates 'a possibility' – borrowers may want to check mortgage...

Negative interest rates 'a possibility' – borrowers may want to check mortgage small print

0


“But it was a great way for people, because you’re not paying any interest, to potentially overpay. Because their interest rate was virtually nothing so instead of paying £1,000 a month and half of it is on interest and half of it is on capital, if they could afford it, they kept it at £1,000 a month and all of that went on reducing the capital. So it works quite well.”

However, since then, mortgage lenders have taken action to reduce the risk of this happening in the future.

“What lenders did after that is they put in things called collars or floors,” Mr Montlake said.

“In the small print of a lot of mortgages these days, it will say that the interest rate cannot go below a certain level – to try and avoid that thing around negative interest rates.”

He added: “Basically, financial regulators have pretty much described interest payments as a one-way obligation on the borrower, not on the lender.”



LEAVE A REPLY

Please enter your comment!
Please enter your name here