The Citizens Advice Bureau has warned that almost a million people have no strategy in place for repaying their interest-only mortgage and could face repossession.
Research from the charity estimates that 934,000 people have an interest-only home loan and do not have a plan for how they will pay it off when it matures. That is much higher than a previous estimate issued by the Financial Conduct Authority (FCA) in 2013, which put the number at around 260,000.
The Citizens Advice Bureau said that time is running out for some homeowners who would either have to sell their home, find the money to pay off the debt, or risk having the property repossessed.
Its research represents the latest in a series of warnings about interest-only mortgages, which have helped millions of people onto the housing ladder during the past two decades, but have in recent years become the subject of a regulatory clampdown.
In 2013, the FCA published research showing that up to 2.6m interest-only mortgages will mature by 2041, of which almost half of the homeowners may be unable to repay the loan at the end of the term. However, 90 per cent of the borrowers said they had a repayment strategy in place to repay what they owed.
The Citizens Advice Bureau research, which included a YouGov poll, suggests the regulator may have underestimated the scale of the problem. It puts the number of people holding interest-only mortgages at 3.3 million. The charity said that figure included 1.7 million who said they had no linked repayment vehicle, such as an endowment or ISA, and 934,000 who had no strategy for repaying the loan. More than 430,000 people “have not even thought about how they will repay the capital,” it said.
Link: Citizens Advice