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Interest-only borrowers face "wake-up call"

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Interest-only borrowers face "wake-up call"

Post  Panda on Thu 2 May - 17:24

Interest-Only Borrowers Face 'Wake-Up Call'


Hundreds of thousands of borrowers have no strategy about
how to pay the money back and could be forced to sell up.



1:04pm UK,
Thursday 02 May 2013



Video: Lenders are being urged to
contact those borrowers most at risk
Enlarge








Up to half of homeowners with interest-only mortages do not have
enough money to pay back the loans, according to the new City watchdog.


The Financial Conduct Authority
(FCA)
fears consumers are under-estimating the scale of the problem
and is urging them to "act now".


Interest-only mortgages allow borrowers to pay off the capital only when the
mortgage term ends, enabling them to maximise their borrowing
capacity.
13% of borrowers were unaware they needed an
interest-only repayment plan

They have become much harder to obtain since the credit crunch, with most
banks now demanding borrowers have the equivalent sum tied up in stocks, savings
or another property.


But the FCA believes around 260,000 people still on the deals have no
repayment strategy.


Borrowers surveyed as part of the FCA's research thought their shortfall
would be around £22,100 on average but the regulator's estimates suggest around
half would exceed £50,000.


Some could end up having to sell their home to pay the money back if they do
not take control.


FCA chief executive Martin Wheatley said: "By acting now we are aiming to nip
this problem in the bud.


"Mortgage lenders have volunteered to contact their most at-risk customers
with a 'wake-up call' to highlight the report's findings and what they need to
do without delay."


He added: "My advice to borrowers is to not bury your head in the sand - take
action now."
Mortgage lenders will contact homeowners
considered most at risk

Around 2.6million interest-only mortgages are due for repayment over the next
30 years but research reveals one in 10 have no plan for paying the money
back.


The FCA report said it was not clear how well some borrowers understood
the discussions about how the mortgage was meant to be repaid when they took
the deal out.


Some 13% of interest-only borrowers said they did not know they needed a plan
to repay the whole amount borrowed, not just the interest - and a further 6%
were unsure.


However, those unaware of the need for a repayment strategy were more likely
to have signed up longer ago, the report found.


Just one in 40 people (2.5%) who said they were unaware still has no
repayment plan in place.


Campaigners are also calling for more work to make sure borrowers were not
mis-sold deals.


Richard Lloyd, executive director of consumer group Which?, said:
"We're worried that a significant proportion of consumers say they did not know
they needed a separate repayment plan on their interest-only mortgage."


The FCA said it is concentrating its efforts on making sure that the people
whose interest-only mortgages are maturing will have a way of paying their loan
back.


It is thought that despite the report's findings, there are no particular
jumps in mortgage complaints figures to suggest that the way that
interest-only mortgages were sold was a widespread problem.


A Council of Mortgage Lenders (CML) spokesman said that the body's focus
will be on helping those who still have no strategy in place for repaying
their mortgage.
==================================
Another mad idea by the Banks without a thought for the ultimate repayment. My Neice and her Boyfriend wanted to buy a House and they were a small amount short of the minimum borrowing repayment. The Bank told him that if he could get his Boss in work to write saying he would be getting a rise they would accept that.!!!!!
Also, if your House went up in value you could increase your Bank Loan. Now of course Houseowners can't sell their Houses so the situation is much worse.
We live in this gottahave age where debt is not considered a problem.........until now.!!!!!!!







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