Figures Highlight Repayment Worries For Some Consumers
By Rob Dixon
The Financial Conduct Authority’s (FCA) warning for consumers with interest-only mortgages to ensure they are prepared for the future has been welcomed by Irwin Mitchell’s field service agency Ascent, which works with both lenders and borrowers in relation to mortgage arrears.
Research by the FCA found that 2.6 million interest-only mortgages will be due for repayment over the next 30 years, but ten per cent of consumers with the products (260,000) do not have plans in place in terms of how they expect to repay.
Concerns were also raised that borrowers may be underestimating the issue, specifically in relation to whether they would be able to pay off the loan and the exact level of their shortfall.
The study also found that 81 per cent of people claimed to understand the terms of the loan, with 13 per cent saying they did not and another six per cent suggesting they were unsure.
Reacting to the research, Niall Gilhooley, Chief Executive of Ascent, said that such concerns over interest-only mortgages were not new.
He outlined: “Our national field team have been involved in much work in the past couple of years to both lenders and borrowers in relation to the issue of interest-only mortgages, specifically when the repayment vehicle is unknown.
“This work has seen us reconnect borrowers with their lender, while in other cases we have helped them to review their various options and how to proceed with resolving their situations.
“There has been a variety of responses in relation into issue, with some revealing intentions to downsize, sell and move to rented accommodation and others being reliant on remortgaging and taking a cash lump sum from a pension to pay off or reduce their debt.
“Unfortunately, some borrowers simply have no idea what their next step will be, with others choosing to also bury their heads in the sand.”
Niall added: “The FCA are keen that there is a full understanding of the borrowers circumstances, so that the most appropriate assistance and support can be given or treatment strategy applied.
“Ascent sees this as an area of the market where the demand for a face-to-face service will increase and we are investing in appropriate skills and training with our field agents to deliver the most beneficial service that assists both the lender and the borrower.”