More than a quarter of a million homeowners will be unable to pay off their mortgage at the end of its term, the City watchdog warned this week. That's because they have interest-only loans, and have done nothing to ensure they will be able to pay off the debt when the mortgage term ends.
Research from the Financial Conduct Authority shows that nearly half of those with interest-only mortgages maturing before 2020 are likely to have a shortfall, with a third of the shortfalls expected to be more than £50,000.
In fact, with the average shortfall standing at around £72,000, those who haven't saved at all to repay loans falling due in 2020 would need to put away more than £800 a month to cover the debt.
I'm not a fan of interest-only as I prefer to know that any debt I have is being paid off. But it can have its place for those who know they will be coming into a lump sum.
But anyone who has no idea how they will pay their loan off is living dangerously. They should act quickly to make arrangements to have the cash to cover their debt.That could simply mean switching to a repayment mortgage over a longer term, but that something to discuss with your lender.
Meanwhile be wary of claims management firms promising they will get you compensation for being mis-sold your loan. The watchdog says it's unlikely anyone was mis-sold, but if you think you were you can complain to the Financial Ombudsman direct and save paying a fat fee.Reuse content