The Financial Conduct Authority (FCA) has estimated that one million people will not be able to pay off the total when their interest only mortgages come to an end.
In the 1990s, interest only mortgages were popularly combined with endowment policies, but the low interest rate in past years means the endowments are not worth enough to cover the mortgage when they mature. Sales of these policies will become heavily restricted from April 2014 in order to limit this problem reoccurring in the future. Other purchasers thought their houses would increase significantly in price and so could be resold or remortgaged in the future, but the current financial crisis has also hindered these plans.
The FCA say they average shortfall between the 40% of interest free mortgage holders who will not be able to pay off their mortgage by endowment or price rises is £71,000. Whilst some plan to make up the payment with inheritance or savings, 10% of interest free mortgage holders have no repayment strategy whatsoever, and so will be forced to sell their homes when their policies end. Mortgage holders have agreed to contact any interest free mortgage holders, starting with those set to expire before 2020, to encourage them to make a plan for their futures.
If you are looking to buy or sell a property or would like advice on re-mortgaging, contact our conveyancing team today to set up a free consultation.
Andrew is a Commercial & Employment Law solicitor in Leicester. Our Solicitors in Leicester are experts in their fields and dedicated to quality client care. If you would like to find out more about our solicitors in Leicester please contact us.
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