I understand that many mortgage lenders are in the process of writing to borrowers who are only paying interest on their mortgages and not currently chipping away at the capital.

The letters are asking clients to review their plans on how they intend to repay their capital. Many clients have old endowment policies which may or may not be on target to repay the outstanding mortgage, some will be selling the properties and downsizing, thus using the equity to repay the loan and about 10% of the 2.6 million in question who need to repay their loans before 2043…..well they don’t seem to have a plan at all!

To my knowledge no lender has as yet come out and said what they are actually going to do with clients who have no means to repay the loan at the end of the term, or even published a list of possible options – most have said they will deal with each case on an individual basis.

As I see it, lenders have a number of roads down which to go:

  1. The most aggressive approach would be for lenders to “call in their loans” and force borrowers to sell their homes. I think this is fairly unlikely as it won’t really fit with the Financial Conduct Authority’s “Treating Customers Fairly” guidelines.
  2. They could force interest only customers to convert their loans to a capital and interest mortgage. This would in some cases push up the monthly repayments significantly and may not be affordable.
  3. Perhaps borrowers could pay “part and part” where they pay what they can towards the capital.
  4. Finally, lenders could of course simply extend the term and keep collecting the interest each month – on the “never never” as we used to call it!

One thing clients must not do is nothing!

I would urge any borrower who is only paying interest to contact their lender and have the conversation about a repayment strategy. Different lenders have very different rules, so I would urge anyone whose existing lender can’t help them not to panic, but to contact an Independent Mortgage Adviser who can look at switching their mortgage to another lender who may be able to make the figures work.

If you have a questions, please email team@mortgagerequired.com or telephone 01628 50747.

Recent posts

We look at how to get the best Buy to Let mortgage rate, what's in store going forward, and options as a landlord with increasing costs.

Throughout this past week, lenders have continued to reduce their mortgage rates giving borrowers in the UK some welcome news following the change in global tariffs under US President, Donald Trump.

Did you know that buying a house, or relocating is in the top 10 most stressful life events?

Stress of course is an unavoidable part of life and there are many reasons why people experience stress, not just buying a house!

There are lots of effective ways to manage and reduce stress, check out our tips to help you.

With the stamp duty relief ending in England and Northern Ireland, we have listed the top 10 cheapest areas for first-time buyers as published by Rightmove. 

Are you looking to purchase your first home but unsure where to begin? Here are some tips to get you started.

Choosing which fixed rate to go for has been a dilemma for many of our clients so far this year. There really isn’t a right or wrong answer, but below we will look into the pros and cons of a two-year and five-year to help you make the right decision for you.

Here are the lowest fixed mortgage rates of the week, available to first-time buyers, home movers, buy-to-let, and those remortgaging.

Call us for more information: 01628 507477 or email: team@mortgagerequired.com.

According to Rightmove, a whopping 500,000 UK homebuyers are rushing to finalise their home purchase before the new Stamp Duty rules change in April.