Shortfall fears for interest-only mortgage holders

More than a million people 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 says “estimates… suggest” nearly half will 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.

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.


About dbda
dbda is a corporate social responsibility consultancy embracing education and safety in the community. We are privileged to work with a large number of blue chip corporate clients, Government organisations, charitable bodies, Institutes and local authorities. We also have a network of schools, professional bodies, associations, universities and partners, with whom we regularly work in collaboration.

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