A majority of interest-only mortgage customers are relying, at least in part, on selling their house to pay off the capital, research from equity release lender more 2 life has found.
A nationwide study of mortgage advisers found 35 per cent of advisers say clients are planning to downsize or sell their home to pay off loans, while 43 per cent plan to use a combination of downsizing plus other repayment vehicles.
Relying on downsizing is “akin to burying your head in the sand”, more 2 life has warned, and is urging lenders to focus on innovation. Its research shows 46 per cent of mortgage advisers believe lenders and regulators are not doing enough to address the looming interest-only crisis
Financial Conduct Authority figures show 1.3 million interest-only customers face potential shortfalls on their mortgages with homeowners aged 55-plus the most at risk. Customer data from more 2 life demonstrates more than 80 per cent of customers taking out its Interest Choice Plan are using it to clear mortgage debts and releasing £43,570 on average.
Jon King, Managing Director of more 2 life said: “There is growing demand for answers to the interest-only crisis and clearly advisers are concerned that not enough is being done by the industry.
“Relying wholly or partly on downsizing to pay off interest-only mortgages is akin to burying your head in the sand as ultimately people may not want to move or may find it difficult to sell.
“Mortgage lenders are starting to be more proactive in terms of communicating with customers but they also need to come up with more innovative solutions. Equity release has always been about people staying in their own home and people do it for the very reason that they do not want to move house.”
more 2 life’s research shows 21 per cent of advisers say clients are relying on investments to pay off interest-only loans while 17 per cent are banking on endowments and 11 per cent on savings. Around 29 per cent of advisers believe lenders and the Financial Conduct Authority are doing enough to address the interest-only issue.
more 2 life’s Interest Choice Plan enables customers to move from a fixed-date repayment style mortgage to a lifetime mortgage where they only repay on death or on moving into long-term care.
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