The Financial Conduct Authority (FCA) is concerned that many of us who have interest-only mortgages may not be able to meet shortfalls in our mortgage repayment plans. In other words, we do not have the cash to pay off the original loan when the interest-only deal ends. We could face being left homeless as a result.
According to the FCA one in five of us has an interest-only mortgage.
It recently carried out a review into the fair treatment of existing interest-only mortgage customers. The review found that, although mortgage lenders are writing to customers prior to their mortgage maturing, borrowers are not contacting lenders to discuss repayment options.
If you have an interest-only mortgage that is maturing and you haven’t been in touch with your lender about repayments, now is the time. Maturity of this type of mortgage is peaking now among customers who are approaching retirement.
Jonathan Davidson, executive director of supervision at the FCA, said: “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.
“We know that many customers remain reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons. We are very clear that people should talk to their lender as early as possible as this will give them more options when it comes to the next steps they can take.”
There are currently 1.67 million full interest-only and part capital repayment mortgage accounts outstanding in the UK. They represent nearly a quarter of all outstanding mortgage accounts. Over the next few years increasing numbers will require repayment.
The FCA has produced a handy leaflet which outlines your options. You can access it here.