Interest-only and longer-term mortgages: easier access, more risk

As most people are all too aware, over the last twenty years mortgage markets have been liberalised in many western European countries as part of the more general globalisation of finance markets: restrictions on the use and terms of loans have been lessened, and a wider range of financial institutions is now permitted to offer mortgages. Consumers clearly enjoy much greater choice than they had in the days when a mortgage meant a straight annuity loan with a 25-year term and a significant minimum down payment. Conversely, this expanded range of choice makes much greater demands on consumers’ financial acumen, and has generally increased market and credit risk (for the individual borrowers, lenders and society as a whole).