Citizens Advice warns of ticking timebomb for one million interest-only mortgage customers
One million interest-only mortgage customers are sitting on a ticking timebomb, with no idea how they'll pay off their mortgage once their term is up, a charity has warned.
Citizens Advice said this morning that while 1.7m people with interest-only mortgage products have no linked repayment vehicle, such as an endowment or Isa, 934,000 of those have no plan for repayment – and 433,000 haven't even thought about how they'll repay the capital.
Some people said they hadn't been made aware they'd need to repay the capital at the end of their term at all.
The charity said that although rules were tightened in 2012 to force banks to ensure there was a payment plan linked to interest-only mortgages, it was concerned those who borrowed before then don't have the same protections when their term ends than when mortgage holders fall into arrears.
And while a protocol was launched in 2012 which gives lenders the legal obligation to consider options other than repossession when mortgage holders fall into arrears, that doesn't apply to interest-only mortgages at the end of the term.
"[That is] the very point when many customers discover they are in trouble," Citizens Advice said.