Mortgage lenders have met a commitment to contact all of their borrowers with interest-only mortgage, industry body the Council of Mortgage Lenders (CML) says. However, just under a third of borrowers have responded so far.
Lenders have contacted borrowers whose mortgages are due to finish between now and the end of 2020. This follows an agreement made with regulator the Financial Conduct Authority (FCA).
The clock is ticking
The CML says lenders have got in contact via mailings, telephone calls and even home visits to ask how they are going to repay their mortgage. It’s all part of an effort to defuse the so-called interest-only mortgage ‘timebomb’, where borrowers come to the end of their interest-only mortgage term without enough money to pay off the capital amount left.
Of the 30% of people who have responded, encouragingly four out of five say they have a plan to repay their mortgage in full.
And the CML says that since the current spate of warning messages began last year both the number of interest-only mortgages and the amount borrowed on them have begun to fall.
Some people have shifted their interest-only mortgage to a repayment mortgage, where you pay both capital and interest back each month.
The concern was sparked by the FCA, which claimed that up to 1.3 million mortgages were facing a shortfall and in around a third of these cases the shortfall was greater than £50,000.
If you have an interest-only mortgage and are worried about paying it off, the first thing to do is not to panic. Lenders will be sympathetic and want to help you. But the most important thing to do is to act now.