Home.co.uk
Home.co.uk

News: 1.3 million on Interest Only mortgages

Wed, 26 Nov 08

More than one million people in the UK have an interest-only mortgage with no firm investment plan for paying it off, new research has revealed, despite borrowers being warned by Clive Briault of the FSA in December 2006 that "Consumers' repayment plans need to be realistic and robust," and "Consumers should not, for example, assume that house prices will continue to rise at the rate seen in recent years."


According to a recent study by London Victoria, 1.3 million people are still not paying anything against the mortgage debt secured on their home, representing over £74billion-worth of UK borrowing.

Chief executive of the LV Group Mike Rogers was quoted, "We urge interest-only borrowers with no firm capital payment plans to review their options and seek professional advice early if needed."

He added that people's finances have undoubtedly been squeezed in recent months but a little financial planning could "make a real difference".

The study also showed that 40 per cent of interest-only borrowers could not afford to make any repayment at present and would be entirely dependent on the sale of their property to pay off the mortgage - alarming news given the recent fall in property prices.


The Council of Mortgage Lender's latest figures also show that home buyers continue to take out interest-only mortgages with no specified repayment vehicle, such as an endowment or an individual savings account.

Earlier this month, Nationwide announced that house prices in the UK fell again for a twelfth consecutive month in October, and the Home.co.uk Asking Price Index showed steepening falls in the latest report.


See also: Mortgage Advice


By Doug Shephard

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