Interest only customers – Fifth of face not being able to repay mortgages
One in every five homeowners in the UK with an interest only mortgage faces the real threat of not being able to repay their mortgage when the loan matures, according to a report by the UK’s largest financial field agency business.
According to Ascent Performance Group, the UK’s leading provider of outsourced debt solutions for lenders, the most recent analysis shows that when UK homeowners with interest only loans were asked how they intended to pay back the capital portion on their mortgage, only 43 percent said that they had a suitable financial vehicle to repay the loan.
Most worrying was the 20 percent who said that they had nothing in place or they didn’t know at this stage how they were going to pay back the capital lump sum.
The survey also revealed that over a third (37 percent) had a plan which either required being forced into downsizing and selling their current property, relying on their family for financial support, selling a second property or switching to more expensive repayment mortgage.
These findings highlight a potentially huge issue not only for homeowners, but also for lenders if they do not address the issues. Its latest report into the issue follows a recent Financial Conduct Authority (FCA) paper which estimated that six million interest only mortgages will be due for repayment by 2020. The FCA’s study also pointed to a similar proportion to that identified by Ascent not having a repayment plan in place.
Post courtesy of Financial Reporter.