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.
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