Over the past year mortgage lenders have been writing to borrowers with interest-only mortgages that are due to mature by the end of 2020 to find out how they plan to repay their loans.
The Council of Mortgage Lenders says that the commitment given by lenders to the Financial Conduct Authority to contact interest-only borrowers has resulted in a 30 per cent response rate.
Its survey of lenders found that four out of five respondents are on course to repay their loan but one in five has no idea how they will pay their mortgage back at the end of the term.
Among those who did not know how they will repay their mortgage, the solutions and approaches lenders are offering typically include term extensions, permanent conversions to a capital and interest mortgage, and overpayments.
Lenders have been using a variety of contact strategies. In addition to reminders and mailings requesting the customer’s written response (including questionnaire responses), telephone calls, face-to-face meetings and even home visits are also used by some lenders.
Looking ahead, lenders will build on the experience they have gained over the past year to refine their contact strategies and continue to seek responses from borrowers who have not yet communicated with them.
There has been a significant fall over the past year in both the number and the value of interest-only mortgages.
CML director general Paul Smee commented: “We are pleased to report that lenders have met their initial commitment to contact interest-only borrowers whose mortgages are due to mature by the end of 2020. But we all recognise that this is just the start of a long term, continuous communication programme.
“If you have an interest-only mortgage due to end before the end of 2020 and you have not yet responded, it is important to communicate with your lender, even if you know your plans are on course. If they are not, your lender will want to work with you to help minimise any difficulties.”
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