Interest-only mortgage surge
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.”