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 a financial field agency business.
According to Ascent Performance Group – 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 per cent said that they had a suitable financial vehicle to repay the loan.
Most worrying was the 20 per cent 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 per cent) 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.
Niall Gilhooley, Chief Executive at Ascent, said: “Our findings highlight a potentially huge issue not only for homeowners, but also for lenders if they do not address the issues. We are aware of a number of responsible financial institutions taking proactive steps to deal with the problem, but it is certainly not as widespread an approach as might be expected.”
The Financial Conduct Authority said that although 90 per cent of lenders were generally endeavouring to treat customers fairly, they were at different stages in terms of their plan for dealing with the issue.
Gilhooley added: “We certainly support the FCA’s call for more action to deal with the issue – indeed we had been working with a number of lenders in relation to interest-only mortgage repayments long before the FCA issued its paper.”
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