Mortgages: interest-only deals a ‘ticking time bomb’ for one million homeowners
In a report on The Independent, Citizens Advice are calling interest-only mortgages a ‘ticking time bomb’ after nearly a million UK homeowners are found to have no way to pay off the money they owe.
An interest-only mortgage gives the borrower cheaper monthly payments as they only pay the interest on their home each month; but they never actually pay back any debt, meaning they still owe the lender the same amount you borrowed at the end of the mortgage term.
Citizens advice warned that millions scooped up an interest-only deal three years ago before the stricter rules were put in place, and now 934,000 owners do not have a plan in order to pay back the money at the end of the mortgage term, possibly having their property repossessed or to face selling up.
Hugh Strickland from Citizens Advice told the BBC: “This is a ticking time bomb. We would encourage people to come to us. It’s very important people think about their money in the short and the long term. We think the banks could be doing more here”
Problems are expected to start in 2017; when endowment mortgages sold back in the 80/90’s reach their peak of maturing. According to the BBC, banks and building societies have been told by regulators to contact their customers to warn of financial dangers.
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