In­ter­est-only mort­gage surge

Belfast Telegraph - Homefinder - - Home Finder -

MORT­GAGE ad­vis­ers are see­ing a surge in in­quiries from cus­tomers fac­ing in­ter­est- only mort­gage dead­lines with the av­er­age age of strug­gling bor­row­ers around 70.

A new study for eq­uity re­lease re­fer­ral ser­vice Key Part­ner­ships found the grow­ing in­ter­est- only mort­gage is­sue is driv­ing busi­ness for mort­gage ad­vis­ers – around 61% say they have seen a rise in en­quiries over the past year.

But the big­ger prob­lem is cus­tomers who can­not re­pay the cap­i­tal from their in­tere­stonly loan and nearly two out of three ad­vis­ers (63%) warn of an in­crease in those en­quiries over the past year.

De­tailed anal­y­sis of cus­tomers fac­ing short­falls shows their av­er­age age is 70 with nearly half (49%) of ad­vis­ers say­ing they reg­u­larly deal with cus­tomers who have en­dow­ments which will not pay off loans, while 17% have dealt with cus­tomers whose lender has al­ready ex­tended their re­pay­ment dead­line.

Ad­vis­ers fore­cast a 20% rise in de­mand for new in­ter­est- only so­lu­tions from lenders over the next two years while around 69% of ad­vis­ers say they are aware that eq­uity re­lease is a po­ten­tial so­lu­tion.

Cur­rently the Fi­nan­cial Con­duct Au­thor­ity is con­sult­ing on al­low­ing re­tire­ment in­tere­stonly mort­gages in re­sponse to the grow­ing prob­lem.

Coun­cil of Mort­gage Lender data shows more than 300,000 bor­row­ers have in­ter­est- only loans worth more than 75% of their homes and in­dus­try es­ti­mates show there are around 40,000 in­ter­est- only mort­gages reach­ing ma­tu­rity each year un­til 2032.

Will Hale, CEO of Key Re­tire­ment said: “Around 10,000 cus­tomers a year are ex­pected to come to the end of their in­tere­stonly loan with no way of re­pay­ing the lump sum and mort­gage ad­vis­ers are deal­ing with the fall out.

“The in­crease in en­quiries high­lights the real need for so­lu­tions and while the FCA con­sul­ta­tion on re­tire­ment in­ter­est- only loans is wel­come there is a need for so­lu­tions which is where eq­uity re­lease is play­ing a sig­nif­i­cant role.

“Sell­ing up to pay off an in­ter­est- only mort­gage can make fi­nan­cial sense but it is clear a lot of older home­own­ers do not want to down­size. Eq­uity re­lease should be part of all con­ver­sa­tions with older home­own­ers and ad­vis­ers who can rec­om­mend spe­cial­ist sup­port can help older cus­tomers.”

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