The trouble with interest-only mortgages

Even if you can get an impossibly low interest rate (Rl) and unbelievable multiples (Mh) so that you can afford the half million or so for that trendy, ex-council two-bed in Clapham (whoops; Tooting), the chances are that this low interest rate requires a low-inflation environment (in which to exist). So in other words, when the time comes to actually pay for the house at the end of the mortgage, the ‘principle’ (P) will be high in real (adjusted for inflation) terms. In other words, if your payments have stayed low, the end result will be an unaffordable bill to pay for the actual house itself.

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