High Number Of Interest Only Mortgages Without Repayment Plans
Research carried out for the Citizens Advice Bureau has revealed that it is estimated there are around 3.3 million interest only residential mortgages in the UK. That in itself is not necessarily a cause for concern.
However, what is a concern is that there are about 1.7 million borrowers with this type of mortgage that do not have the likes of an endowment policy or ISA or similar repayment vehicle in place to liquidate the residential mortgage at the end of the mortgage term. Also, around 934,000 of those borrowers have no repayment plan in mind. Another concerning statistic is that over 432,000 borrowers with interest only mortgages have not looked into how they might repay the mortgage by the end of its term.
Interestingly, back in 2013, mortgage lenders were asked by the Financial Conduct Authority to get in touch with borrowers who had an interest only mortgage that was due to expire before 2020 to find out how they intended to repay the mortgage. It was disappointing to hear that responses were received by about 30% of customers which we are sure you will agree is a very low figure.
If an interest only mortgage gets to the end of its term and has not been repaid then the lender could end up repossessing the property. The Citizens Advice Bureau feels that a lender should have to go through a number of options before resorting to taking court action. It feels that a homeowner should be given time to sell the property themselves or to talk through a number of repayment options or consider other sorts of mortgage products or extend the term of the mortgage.
If you have an interest only mortgage with no repayment vehicle in place then you may wish to obtain some advice from the likes of the Citizens Advice Bureau.