Interest-only mortgage holders face shortfalls warns watchdog

Around 2.6 million UK householders have interest only mortgages and face a worrying shortfall when they come to pay them off. The Financial Conduct Authority estimates that nearly half of these home owners will not have savings or other funds to cover the final bill. The average shortfall is £71,000, according to FCA research.About a third of all UK mortgage holders have these types of mortgages and make repayments each month that just cover the interest on the amount borrowed. The full amount of the home loan is then due to be paid back when the mortgage term matures using funds such as savings, inheritance or from the sale of a business. However, research by the FCA suggests that 37% of interest-only mortgage holders faced a shortfall in their plans to pay back remaining sum of the home loan. More worryingly, one in 10 have no repayment strategy in place at all and face having to sell their homes when their mortgage matures.With this information, mortgage lenders have agreed to write to borrowers to ensure they have a repayment strategy in place, with the bulk of the effort focusing on those whose policies mature first. Paul Smee, director general of the Council of Mortgage Lenders said “Anyone with an interest-only mortgage maturing before the end of 2020 should expect to be contacted over the course of the next 12 months by their lender.”The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.Setfords Solicitors are a national full service law firm, with residential property solicitors in Reading and across the country.