Interest OnlyMillions of mortgage holders with interest-only mortgages face a financial crunch when they have to pay them off, a watchdog is warning.

Some 2.6 million UK householders have the mortgages but the Financial Conduct Authority said estimates suggested that nearly half would not have savings or other funds to cover the final bill.

The average shortfall is £71,000, according to FCA research.

Lenders will now step up warnings to homeowners to prevent payment shocks.

Mortgage timebomb

Homeowners with these types of mortgage – about a third of all UK mortgage holders – make repayments each month that just cover the interest on the amount borrowed.

The full amount of the home loan should be paid back when the mortgage term matures – usually after 25 years – using funds such as savings, inheritance or from the sale of a business.

These mortgages were popular when sold alongside an endowment policy in the 1990s, and again during the last decade when many homeowners banked on the rising value of their home to cover the cost.

If you have a mortgage on Interest Only, you should consider a review and confirm that any repayment vehicles you have are on track to repay the loan. If you would like a review and consider transferring to a Repayment mortgage, please call us on 01489 450020 or email us on info@parkgate.net and we can arrange a mutual meeting to discuss your financial position.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.