FCA Warn Interest Only Borrowers

Who is the FCA?

The Financial Conduct Authority is the regulator of 56000 financial service firms. They aim to help financial markets work for individuals, businesses and the economy. They also look to protect consumers, protect financial markets and promote competition.

Why are they concerned?

Interest only mortgages will require the outstanding mortgage to be cleared at the end of the term. Many savers are not planning to ensure funds are available to clear these mortgages. The FCA also found that many borrowers were ignoring lender letters and warnings regarding their mortgage.

Around 1 in 5 mortgages in the UK are either interest only or have some interest only part of their mortgage. It is expected that these mortgage end dates will peak in around 10 to 14 years. At this point many borrowers may not have means to repay the loan and may be forced to sell the property.

Interest only borrowers should speak to your lender or discuss your options with an adviser. Getting a plan in place earlier will make meeting any shortfall much easier. Many interest only borrowers may also be in positions to remortgage onto a repayment basis which would remove the future deficit.