Newspaper article Manchester Evening News

Matters of Interest

Newspaper article Manchester Evening News

Matters of Interest

Article excerpt

Ignoring those letters from your mortgage lender? You'll probably want to read this expert advice then, says VICKY SHAW

DID you know that some home owners could be at risk of losing their property for good - because they've ignored correspondence from their lender about how they plan to eventually clear their mortgage debt? Nearly one in five mortgage customers have an interest-only home loan, according to the Financial Conduct Authority (FCA), which is urging people with this type of deal to talk to their lender.

So what are the issues with these deals, and where can you go to for help? Here's a guide: WHAT ARE INTEREST-ONLY MORTGAGES? UNLIKE the repayment mortgages which are common nowadays, interest-only deals allow you to only pay the interest off, rather than paying down the mortgage loan itself. With the money still outstanding, borrowers need to have plans in place for how they eventually plan to pay back the capital - the amount that was borrowed.

WHAT'S THE ISSUE? IF you don't have a plan in place for repaying the capital, you could be faced with having to find a large amount of cash to pay at the end of your mortgage term - and you may need to sell your home to repay it.

HOW MANY MORTGAGE HOLDERS ARE AFFECTED? THERE are 1.67 million full interest-only and part capital repayment mortgage accounts outstanding in the UK.

These represent 17.6% of all outstanding mortgage accounts and, over the next few years, increasing numbers will require repayment. Some people will have adequate plans in place - but others may not.

Interest-only mortgages are expected to mature in a series of three waves. The first one is happening now, but many home owners in the current wave have larger amounts of equity, some having benefited from house price rises over the decades. The next two peaks in 2027/2028 and 2032 include less affluent people - who could be more at risk of cash shortfalls.

WHAT CAN BORROWERS DO? THE regulator says it's important for those who haven't made plans to act now - while there may still be time to improve their situation and a range of options available.

Putting it off for longer could increase the likelihood that borrowers may have to cash-in investments they were hoping to keep in order to keep their property - or in some cases, that borrowers may have to sell their home. …

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