Interest only mortgages and equity

[demoivre]

I read with great interest in yesterdays Irish Times what Olive Moran, marketing manager with BOI mortgages , had to say about interest only mortgages. She says that as there is no capital reduction that means there is no equity being created because the debt is not being paid down !!! I wonder does she now how to calculate a LTV ratio?

 

[WizardDr]

I suppose if Olive had said that rampant house inflation would continue unabated and that you should all dive in with interest only mortgages there would be another view. All that was being said, is simply that if you are on interest only, and if house price slows (which was said in 1998,1999,....2005) then you would not have equity.

As the economist says ..ceteris paribus ..