Gen H is launching the first phase of a three-part interest-only mortgage proposition today, designed to boost affordability and help first-time buyers break out of the rental cycle.

The specialist lender said the proposition, which will roll out in stages over the coming months, is aimed at homemovers, remortgagers and, in particular, financially-savvy first-time buyers.

It is intended to offer brokers a powerful tool to close the gap between income and borrowing potential.

SIZEABLE AFFORDABILITY UPLIFT

According to Gen H, where a credible repayment strategy is in place, interest-only borrowing could provide a 10–15% affordability uplift over a 30-year term, potentially enabling buyers to purchase property they would otherwise be priced out of.

The first phase comprises a full interest-only product available through intermediaries on Gen H’s panel. It targets young professionals and self-employed first-time buyers looking to combine the benefits of homeownership with the ability to continue saving or investing.

SUMMER BOOST

Phase two, set to launch in summer 2025, will introduce an “interest-only with a boost” option. This will allow income boosters – such as family members – to support repayment strategies without liquidating investments like buy-to-let properties or pension pots prematurely.

The final stage of the proposition, expected in autumn, will offer a part-and-part mortgage, combining elements of capital repayment and interest-only to enhance affordability even with small deposits.

The lender confirmed the new offering will come with its own product range, beginning with a rate of 5.09% at 60% LTV. The maximum loan-to-value across the range is 80%, and the minimum household income requirement is £50,000.

Loans can run to the eldest borrower’s 75th birthday or retirement, whichever comes first.

REPAYMENT STRATEGIES

Gen H said acceptable repayment strategies include the sale of the mortgaged property – up to 60% LTV with at least £200,000 equity – as well as the sale of another property, investments and pensions.

Regular savings, cash and bonus income are to be accepted in due course.

Full lending criteria will be made available to brokers via the lender’s criteria and packaging centre.

Pete Dockar, chief commercial officer at Gen H, said the launch reflects the need to approach affordability with greater flexibility and innovation.

“Housing affordability challenges are here to stay, and helping everyone access homeownership and build long term wealth requires us to consider how familiar tools can be used in new ways,” he said.

“interest-only is a perfect example – it has long been considered a tool for the rich, but as one of the UK’s only lenders creating truly incremental homeowners, we believe it can support first-time buyers as well.

“Too often we expect aspiring buyers to either save or own, but for some, interest-only can be the tool that lets them do both – while boosting affordability at the same time.”

Dockar added that Gen H is confident brokers will use the new proposition “with precision” and that the next phases will further broaden its appeal.

“DANGEROUS”

However, not everyone has responded positively to Gen H’s proposition. Martin Stewart from the mortgage broker London Money said: “Let’s not forget that interest-only was one of the significant contributors to the crash in 2008, along with pushes for higher loan-to-value lending and excessive income multiples.

“Throwing all these things together to limp the housing market forward feels like a dangerous game.”