Interest-only mortgages 'make rental properties profitable'

Interest-only mortgages are vital for buy-to-let landlords who want to ensure their portfolio of property funds itself, an industry expert has said.

Stephen Lee, the director of Alpha Financial Management, explained that many landlords rely on their portfolio increasing in value as house prices rise and interest-only mortgages allow them to maximise their potential profits.

He added: "Unless [landlords] want to put some of their own income into the mortgage repayments - an interest-free [mortgage] is the only way to actually have a self-funding property.

"[With a] repayment mortgage the monthly rates are just far too high."

Mr Lee added that there was little risk of negative equity for landlords, as the housing market looks set to remain robust in the long term.

He concluded: "If there is a dip in the housing market it may take two or three years to recover… But I wouldn't suggest that people will be left with a huge negative equity for years to come."

Recently, the National Housing Federation said that house prices in the UK could increase by 40 per cent over the next five years.