Interest-Only Traps: How, Why and What Can You Do?

One could say UK banks are focused on making profits instead of ensuring consumers get the most out of their financial products. As some terms and conditions trap UK consumers into an interest-only mortgage with a very high rate, only re-mortgaging becomes the option to lower the fees.

Some UK banks have these terms and conditions:

A customer with an income of £75,000 or a joint £100,000 annual income could change their interest-only mortgage rates smoothly. 

Initially, your bank could refuse your request. But look for the following clause in your terms and conditions.

“Banks could make a decision on interest mortgage rates should they find the customer satisfactory in fulfilling the requirements needed.”

Or something like that.

If banks ignored this instance, you could talk to them. Never settle for anything less and never let your bank decide. Make sure that you feel uncomfortable with your current interest-only mortgage rates.

Remortgaging, which puts the interest at a higher rate for your mortgage, has some advantages. It reduces your taxes yearly. Think about that. But if you’re decided to lower the rates on your interest-only mortgage, then whichever works for you is better. 

Just make sure to avoid the trap. Read your terms and conditions thrice and avoid giving the bank the final decision.