FCA concerned by silent interest-only borrowers

Lloyd Doyle
January 30, 2018

The FCA has identified three peaks in interest-only mortgage repayments, the first of which is now underway.

Samuel Tombs of Pantheon Macroeconomics noted that the effective interest rate on mortgages rose to 2.55pc in December, up from 2.50pc in November, the first increase since May 2014, and the largest since January 2010.

If you've got an interest-only mortgage urgently check you will be able to pay the balance at the end of your mortgage, if you're anxious you won't be able to see below for help on what you can do.

The FCA has reviewed the sector for a second time, looking at 10 lenders who represent about 60 per cent of the market.

Mortgage lenders are writing to interest-only customers ahead of deals maturing to check repayment strategies are on course, but many borrowers are not engaging, the FCA found, as part of its review on the treatment of interest-only borrowers.

Where lenders tailored their work to the different customer types identified, they were able to increase contact with those considered higher risk.

The Financial Conduct Authority has urged lenders to do more to help borrowers on interest-only loans, warning that a "significant number" are at risk of losing their homes.

The FCA also found that, although lenders were recommending repayment options that appeared appropriate, the processes which customers had to follow were, on many occasions, challenging.

John Davidson of the FCA said the regulator was "very concerned" that a "significant number" of interest-only customers may not be able to repay the capital at the end of their mortgages. "We are encouraged to see that lenders have taken positive steps to engage with and help their interest-only customers", Jonathan said.

I've got an interest-only mortgage - what can I do?

. The next two peaks, from 2027 through 2028 and in 2032, are more at risk of shortfalls, the regulator said.

Nearly 18 percent of outstanding mortgages in the United Kingdom are interest-only or involve only partial payment of the capital, according to the statement. Paul Smee, head of mortgages at UK Finance, the industry body that represents home loan lenders, said the FCA's review showed good progress by the sector, with some areas for improvement.

He continued: "We know that many customers remain reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons".

- 1. Speak to your lender or mortgage adviser - they may have options which you can discuss together and may give you peace of mind.

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