Banking: Interest-only mortgage crisis looms
Thursday 20 September 2012
Lenders are facing a massive £116bn in unpaid interest on mortgages which are due to mature by 2020, according to xit2, a leading asset valuer.
Up to 1.3 million interest-only mortgages were written at the height of the credit boom, often as a way to get first-time buyers or those with poor credit histories on to the property ladder.
However, it is estimated that 1.04 million of these mortgages do not have a final repayment plan in place, meaning the borrower will come to the end of their mortgage term still owing the full capital sum. This could create a major headache for borrowers and banks alike.
Mark Blackwell, the managing director of xit2, said: "The big block of outstanding balances which are due to mature over the next eight years is a legacy of unsustainably high interest-only lending prior to the financial crisis.
"If lenders fail to help these borrowers find a repayment vehicle, it will come back and give them a nasty bite. Plenty of those will be families on tight monthly budgets, with low household earnings and little to no life savings."
Many of these borrowers will also face negative equity. Steve Lowe, director at the equity release mortgage specialist Just Retirement, said: "This is something we and the debt charities are increasingly becoming aware of. Many of these people are approaching retirement, so their options for repayment are narrowed."
- 1 This is what happens when you tattoo Charmander on yourself, drunk, and with no experience
- 2 BBC election debate: The one photo that summed up the whole 90-minute leaders debate
- 3 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 4 The Batman v Superman: Dawn of Justice trailer has leaked – watch
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
If I’m being racially abused I don’t need a white stranger with a saviour complex to rescue me
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
Russian warships in English Channel 'to conduct anti-aircraft and anti-submarine military drills'
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...