Interest-only mortgage holders 'risk old-age debt'

More than a quarter of a million interest-only mortgage holders could be reaching retirement age by 2020 still deep in debt.

Figures buried in a recent Financial Services Authority (FSA) report show that of 150,000 interest-only mortgages due to mature every year between 2012 and 2020, around 40 per cent are likely to be in shortfall. More than 40,000 a year will be held by people over the age of 60 – close or beyond the state pension age.

"The options will be stark: work on to repay the debt or find another way to use the equity in the property," said Stephen Lowe, director of Just Retirement.

Meanwhile, Labour plans to table an amendment to the Financial Services Bill on Tuesday that would force banks to give proper notice of interest rate hikes, following a number of sudden rises from the likes of the Halifax and RBS-Natwest.

Chuka Umunna, the shadow Business Secretary, said: "It is not acceptable for banks to give, in some cases, just 14 days' notice of substantial rate hikes and expect consumers to simply put up with it."