A theme is emerging in the UK mortgage markets of lenders making the criteria by which lenders can switch to interest only payments tighter, potentially making repayments more difficult for those in financial trouble. 

Interest only payments are self explanatory, the borrower pays the interest on the amount loaned but doesn’t pay down the actual amount. The switch to this type of payment scheme was traditionally very popular in recessions as it allowed householders to greatly reduce their monthly payments. 

The downside to the scheme is that you are extending the overall mortgage period, increasing the amount of time it will take to pay back the whole thing and officially own your own home. 

However, many mortgage lenders discontinued most interest-only mortgages during the recent financial crisis, despite the option being the most suitable for workers who do not get a regular monthly pay cheque.  

Some lenders still allow borrowers to have an interest-only mortgage, but at a price, potentially negating the savings the scheme should create. 

Halifax, the country’s largest mortgage lender, has recently added an extra 0.2% in fees to its range for borrowers who opt for an interest-only deal. In March, it made the same rise with its tracker range, but some analysts believe this is just another way of punishing home owners who are struggling to afford monthly repayments.  

Halifax said the decision aims to reward responsible customers that are repaying capital. This is a noble aim but doesn’t explain quite how they are rewarding one group of customers by penalising another. 

In a similar move, Lloyds has increased the threshold for anybody wanting to get an interest-only loan and increased rates by 0.2%. It is also introducing an upper limit which means it will refuse an interest-only mortgage of more than £500,000. 

Analysts believe that once gone, interest only mortgages are unlikely to reappear on the market because the Financial Services Authority (FSA) has, justifiable, deemed them to be higher risk than repayment loans. 

The FSA has issued a warning recently that home buyers who take out interest-only mortgages are simply creating large problems for themselves in the future because they fail to plan for how to pay down the capital. 

This development is a prime example of large financial institutions claiming to be doing the right thing while lining their own pockets. They should be stimulating financial responsibility by rewarding people who pay down the mortgage amount but instead they are punishing people who want or need to switch to an interest-only mortgage.

In keeping with the Conservative manifesto and the deregulating theme of the new coalition Government, they have suspended the controversial Home Information Packs (Hips). The Hips were introduced in 2007 in England and Wales with the aim of speeding up the house selling process by obliging sellers to provide much of the conveyancing information required when properties are first put up for sale.  

The controversy came because the packs are paid for by sellers and therefore add several hundred pounds to the act of putting a house on the market. 

The requirement for Hips will be suspended for anyone selling their home from 21 May, although the government will need to enact legislation to outlaw them completely. 

The announcement was made by the government in its coalition document so represents Conservative policy the Lib Dems have signed up to as part of their role in the new regime. 

The new Housing Minister has decided that the overly- bureaucratic and expensive Hips will be done away with, but in keeping with the green ambitions of the coalition parties an energy performance certificate will still be required. 

An energy performance certificate ranking the energy efficiency of a home with an A to G rating will have to be produced by the seller within 28 days of putting a home on the market and costs approximately £60.  

There are concerns by some analysts that the abolition of the requirement to provide a Hip will put further pressure on first time buyers because the cost of searching for the information previously contained in a Hip will now fall on purchasers. 

However, analysts have long maintained that the packs, which cost on average £300 - £350, were stunting the housing market recovery, as they deterred people from putting their home on the market just to test the water.  

As such, estate agents and others working in the house sales industry have welcomed the abolition. 

The Royal Institution of Chartered Surveyors (Rics) responded to the news by claiming that Hips have failed to solve the problems they were originally designed to address and therefore welcoming their suspension. 

The disadvantage of removing Hips, that they put more costs on first time buyers, is very real, but I think that this is outweighed by the benefits to the housing market of making it easier for people to put their homes on the market as a way of ‘testing the water’. In the current state of the UK housing market this boost is much needed.