Approximately 2.6 million interest-only mortgages will become due for repayment within the next decade and while nine out of ten people will have a clear plan in place to repay their mortgage, it’s thought that 10 percent do not. That’s about 260,000 people!
The Financial Conduct Authority (FCA) have written a paper on the subject clarifying their stance. Here are their main findings and recommendations;
The FCA has published guidance to help set out what is expected of lenders and brokers when dealing with borrowers that have an interest-only mortgage. These measures include;
- setting out options for the borrower.
- firms must put in place a written strategy for dealing with interest-only loans they know of that might not have a strategy in place for being paid off at the end of the loan period.
- firms must make staff aware of this strategy and train them accordingly.
- firms must have a strategy for communicating their strategy with their clients.
- firms must assess affordability of new loans or extended loans when they are necessary.
- firms should have a plan in place which will result in existing customers having sufficient time to start putting in place alternative arrangements where necessary at the end of the interest-only loan.
- firms must monitor and manage the effectiveness of this strategy.
The FCA will be monitoring progress closely and providing guidance and assistance to firms where it is needed.
In addition to advice on existing interest-only mortgages, there is also the growing market of Lifetime Mortgages which are also, in large part, interest-only. The Financial Times have written on the subject and we have our own views here.
For more information or to speak to a Maidenhead Mortgage expert, contact us on 01628 507477.
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