One in 10 over-55s UK homeowners are still paying interest-only mortgages and face the prospect of clearing their debt when the deal runs out, new research shows.
According to over-60s property experts Homewise,10% of the 1.4 million over-55s homeowners who are still paying mortgages – the equivalent of 143,500 households – have interest-only loans.
While the majority are confident of clearing the debt substantial numbers fear they will not be able to.
The study shows 17% of interest-only borrowers aged 55-plus – equivalent to 24,300 – admit they will be unable to clear the debt. The average amount owed by over-55s with interest-only mortgages is around £91,000 with one in seven owing more than £150,000.
The Council of Mortgage Lenders estimates that at end of 2015 there are around 1.7 million pure interest-only mortgages outstanding with another 500,000 part repayment and part interest-only loans.
That represents a major success by mortgage lenders and the Financial Conduct Authority which has campaigned since 2012 to help borrowers focus on repaying loans – the number of outstanding interest-only loans has been cut from 3.2 million in three years.
Mark Neal, managing director at Homewise, said: “The mortgage industry has made massive strides in tackling the interest-only issue and has helped borrowers to take action.
“The good news from our research is that the majority of over-55s who have interest-only loans have plans in place to ensure they can pay off the capital but there are still substantial numbers who do not appear to know what they will do.
“They have a range of options including selling their home and downsizing but that may not be suitable for all. The Home for Life plan can help by enabling over-60s to move to a new home under a lifetime lease and release money to clear interest-only debts.”
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