The Intermediary – October 2025 - Flipbook - Page 18
RESIDENTIAL
Opinion
ecently, Gen H was
in the headlines
for a surprisingly
controversial product
launch. What did we
do? We introduced
part capital repayment and part
interest-only mortgages up to 95%
loan-to-value (LTV).
They’re for first-time buyers,
movers and remortgagers. Borrowers
can take up to 80% of the mortgage
on an interest-only basis, and we
require a £50,000 household income.
Applicants must prove they have a
suitable repayment strategy for any
interest-only portion.
Overall, feedback was positive.
Many brokers working closely
with first-time buyers have shown
tremendous engagement. Others,
however, still harbour that slightly
hazy notion that interest-only is a bad
idea for first-time buyers.
It’s apparently fine, though, if
you’re buying your next home, or
so long as you don’t actually need an
interest-only mortgage. This brings to
mind the old joke about bankers being
the type to offer you an umbrella when
it’s dry and take it away when it rains.
To be fair, I can understand a
lile bit of apprehension among
industry veterans.
Aer all, it hasn’t been that long
since the endowments scandal played
out – since millions were paid out in
selements and trust in brokers and
lenders was badly damaged.
It hasn’t even been 20 years since
the financial crisis – where one in two
first-time buyers took interest-only
payments and millions of borrowers
self-certified their income. I won’t
dwell on this; we know how things
turned out.
R
Then, of course, the Mortgage
Market Review in 2014 changed
the way brokers and lenders were
expected to assess and document
mortgage suitability. If a repayment
strategy failed and the broker couldn’t
evidence that the advice was suitable
and the client understood the risks,
they or their firm could be found liable
for mis-selling.
Taken together, the events of the
past 30 years can make interest-only
seem like a bad product. But it isn’t,
not inherently.
What these events actually have
in common was irresponsible
lending and bad advice. Things are
different today.
In the financial crisis, we learned
valuable lessons about what
responsible lending actually means.
This equipped us to beer protect
borrowers and the wider economy
from financial shock.
But the knock-on effect has been
a deeply conservative approach
to mortgage lending. This has, in
my opinion, crossed over from a
reasonable aversion to risk to one
that is actively hurting aspiring
homeowners – and as a result, the
economy at large.
Not convinced? Look no further
than the regulator. It is very revealing
the Financial Conduct Authority
(FCA) is actively recognising
the potential role of interestonly in solving for a huge gap in
homeownership. That’s why we’ve
taken this stance on interest-only at
Gen H. We believe it’s time for all of us
to embrace calculated risk.
Risk realities
It’s a simple mindset shi, really. All
mortgages have risk. Every single one.
PETE DOCKAR
is chief commercial
officer at Gen H
This risk is mitigated by high
quality advice and a responsible,
pragmatic approach to lending. These
two things help ensure a positive
outcome for borrowers. Is that not
what we’re all here to do?
Like all mortgages, interest-only
won’t be right for everyone. But
when it is suitable, part-and-part is
a powerful tool to get clients on the
ladder as a stepping stone toward a
standard capital repayment mortgage.
They can overpay to reduce their
balance and build equity, skirting the
whole frustrating and oen costly
staircasing faff that comes with
Shared Ownership.
The benefits of a part-and-part
mortgage are even clearer when
compared with renting. Renting
is risky; there is no equity upside,
rent consistently tracks or outpaces
inflation, and the renter is always at
the mercy of their landlord
Nothing illustrates a point like a
worked example, so let’s have a look.
Think of an average household – a
married couple, earning £35,000 each.
They want to buy a £400,000 home
in St. Albans. They’re paying £2,000
