Interest only mortgages and the FCA

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Which way are the FCA driving interest only mortgages?

Are you an interest only mortgage borrower?

Have you recently received correspondance from your lender asking you what your plans are to repay your capital?

The Financial Conduct Authority today released further information on how they are likely to ask mortgage lenders to proceed with their interest only borrowers when the mortgage market review comes into effect April next year.

In the past ten years there have been large numbers of residential borrowers that have arranged their mortgages on an interest only basis. This means that at the end of the agreed borrowing term the full amount of the original mortgage will still be owning to the lender. Whilst many borrowers are expected to have made plans to build up funds to repay their mortgage at the end of the term, that will not be the case for all.

Strategies to build up capital to repay mortgages on homes many include:

  • PEPs and ISAs
  • Pension plans
  • Overpayments or offsetting
  • Sale of business
  • Inheritance
  • Equity in other property
  • Sale and downsizing

clearly all of these plans carry the risk of being inadequate at the time the mortgage needs to be repaid.

The FCA believes that whilst borrowers face the ultimate responsiblity repay their mortgage, the lenders should consider putting options in place such as switching the mortgage to a capital repayment basis, extending the term, or allowing overpayments. The FCA further consider that staff at lenders require more training on this issue.

If you have any interest only mortgage and would like to consider your options to ensure that you are not obliged to sell your home when your mortgage term ends contact our team now for specialist advice in this area.

Call us now on 020 8979 9684

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