A flexible mortgage is a product that can make the traditional British mortgage with its fixed and inflexible payment schedule over a fixed term, such as 25 years, look like a bit of a dinosaur.

Flexible mortgages originated in Australia in the 1980s. But they didn’t appear in the UK until the mid-90s when Yorkshire Bank rolled out the first flexible home loan scheme. As a result, flexible mortgages are often referred to as Australian mortgages.

In fact, they are simply mortgages which recalculate the outstanding capital and interest due on a daily basis. This allows you to make overpayments when you have money to spare, and see an immediate reduction in your loan. Some also allow you to make underpayments when finances are tight, which will increase the interest you have to pay. They may even allow you to take repayment holidays – a complete break from making payments as long as a reserve amount of money is in your account.

Finally, in general the more flexible a mortgage, the more financially literate and disciplined the borrower needs to be, therefore flexible mortgages may not be suitable for everyone.

Your home may be repossessed if you do not keep up repayments on your mortgage.



The Financial Services Authority (FSA) does not regulate some forms of mortgage.