One million people at risk of house repossessions
04/09/2015
New research from Citizens Advice has shown that almost 1 million people are at risk of having their homes repossessed because they have no way of paying off their interest-only mortgage.
The research from the national debt charity shows that 934,000 people who have interest only mortgage have no plan to pay it off when the term ends. This means many people would have to sell their homes or get into further debt, and may risk having their house repossessed.
Many people who spoke to Citizens Advice about their interest only mortgages claim that they were not made aware that they would need to pay capital at the end of their term. The average amount owed is estimated at £71,000.
The regulations around interest only mortgages changed in 2012, and they were not available without a viable repayment plan. Citizens Advice believes the people who were sold an interest only mortgage before the new regulations need more support.
The financial regulator, the Financial Conduct Authority (FCA) has said that due to previous peaks in the sale of interest-only mortgages, they expect there to be waves of potential repossessions in the years 2017, 2027 and in 2032. The regulator has called on banks to contact borrowers with interest only mortgages and advise them on repayment plans. Only 30% of banks responded to this.
Gillian Guy, Chief Executive of Citizens Advice, said:
“People buy a home for stability – but interest-only mortgages have forced many into a financial black hole.
“It is good rules around these mortgages have changed, but there are many people who previously took out these products and face losing their home.
“Lenders have to exhaust all other options when borrowers get into arrears – it’s time to level the playing field so that interest-only customers get the same protections when their mortgages mature.
“It is also important that people can get independent advice, guidance and support about how they can plan and manage their finances."
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