Interest-only mortgage holders risk losing homes

Home owners with interest-only mortgages are being urged to act now and talk to their bank or building society after the City regulator found many people are yet to discuss repayment options with their lender.
By The Newsroom
Published 30th Jan 2018, 17:58 BST
Updated 30th Jan 2018, 18:02 BST
Interest only owners need to ensure their payment plan is adequateInterest only owners need to ensure their payment plan is adequate
Interest only owners need to ensure their payment plan is adequate

Nearly one in five mortgage customers have an interest-only home loan, the Financial Conduct Authority (FCA) said - and it is concerned that shortfalls in repayment plans could lead to people losing their homes.

The FCA said, although mortgage lenders are writing to customers before their mortgage matures, engagement rates with firms are low.

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A review by the FCA covered lenders representing around 60% of the interest-only residential mortgage market.

Interest-only deals allow borrowers to pay off the capital only when

the mortgage term ends but concerns have been raised in recent years that many may not have adequate plans in place to eventually clear their debts.

Some could end up having to sell their home to pay the loan back if

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they do not take stronger control of their repayment planning.

The FCA said there are 1.67 million full interest-only and part capital repayment mortgage accounts outstanding in the UK.

It said these represent 17.6% of all outstanding mortgage accounts and over the next few years increasing numbers will require repayment.

Jonathan Davidson, executive director of supervision - retail and authorisations at the FCA, said good progress has been made in reducing the number of people with interest-only mortgages.

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He continued: “However, we are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their homes.”