Interest-only mortgages an ever-present threat for borrowers without a plan for repayment
Some 2.8 million people in Britain have interest-only mortgages. According to estimates from the Financial Conduct Authority, over half of those people will not be able to repay their mortgage when it becomes due. A third of those (ie almost half a million people) will be have shortfalls of more than £50,000.
Some 2.8 million people in Britain have interest-only mortgages. According to estimates from the Financial Conduct Authority, over half of those people will not be able to repay their mortgage when it becomes due. A third of those (ie almost half a million people) will be have shortfalls of more than £50,000.
Those are stark figures in anyone’s book. Recently the Council for Mortgage Lenders announced that their members had fulfilled a promise to contact all interest-only borrowers whose mortgages are due to mature by the end of 2020 to ask them about how they plan to repay their loans.
Thirty per cent replied, and of those four out of five had a clear plan to repay the balance on their mortgage. The CML (and the FCA) seemed happy with that – but mortgage brokers (and debt professionals) beg to differ.
For a start, say the brokers, it seems clear from the figures that the people most happy to reply to the lenders are those who have a solution in place – precisely not the people everyone is so worried about.
The rest – for example, those who face a drop in income at retirement while still owning thousands of pounds on their home – may still be caught in a desperate financial trap.
David Rodger, chief executive of Debt Advice Foundation, said:”We’ve seen a significant rise in insolvency amongst older people, and that is not likely to change as these interest-only mortgages reach full term and have to be repaid.
“Lenders need to make a real effort to have proper conversations with all their interest-only borrowers, so they can be given advice and supported before they face the real risk of losing their home. These mortgages are an ever-present threat hanging over hundreds of thousands of householders.”
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