The BBC reported this week that hundreds of thousands of homeowners are at risk of losing their homes by ignoring how they will pay off their interest-only mortgage.
The warnings from industry regulator, the Financial Conduct Authority (FCA), revealed that around one in five mortgage-holders has an interest-only home loan. They will need savings or other funds to pay the final lump sum at the end of the mortgage term (with many of these mortgage terms ending in the next 10 to 14 years).
Data from the FCA highlights how there are 1.67 million full interest-only and part-capital repayment mortgages still outstanding. This equates to just over 17.5% of all UK mortgages.
Interest-only deals allow borrowers to pay off the capital amount only when the mortgage term ends - typically after 25 years. There are concerns however that many homeowners do not have plans in place to make the final payment.
The FCA is urging these borrowers to talk to their lender as early as possible: "We are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their home."
We reported in December last year that nearly quarter of our customers who released equity from their properties last year did so in order to clear a mortgage debt.