Interest-only mortgage warning

The City watchdog has warned that a quarter of a million homeowners with interest-only mortgages will be unable to pay off their mortgage at the end of its term.

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Age UK calls to 'lift age limit' on mortgages

A regulator warned that those on interest-only mortgages are facing a "wake up call". Credit: John Stillwell/PA Wire

Age UK's charity director general has called for banks and building societies to lift "arbitrary age limits on loans" after a financial regulator warned that up to half of interest-only borrowers will not have enough money to pay their loans back.

Michelle Mitchell said that the age limits prevented older people who could afford a mortgage from extending the term of their loan.

She said: "Decisions on lending should be based on whether an individual is able to repay a loan not on an outdated vision of what it means to be older. It is also important to have access to targeted, independent advice for those older people who are experiencing difficulties."

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What to do if you have an interest-only mortgage

A guide for homeowners on interest-only mortgages has been released by the Money Advice Service.

A regulator warned that those on interest-only mortgages are facing a "wake up call". Credit: Dominic Lipinski/PA Wire

The Financial Conduct Authority warned that those on interest-only mortgages are facing a "wake up call" because around half will not have enough money to pay their loans back.

Read: Warning for homeowners with interest-only mortgages.

Low interest rates are creating a 'golden opportunity'

Mortgage expert Ray Boulger told Daybreak that because of low interest rates, there is currently a "golden opportunity" for people to address their mortgage payments.

A regulator has warned home owners on interest-only mortgages that they are facing a "wake-up call" because up to half of these borrowers will not have enough money to pay their loans back.

Mr Boulger said: "If for example you took out a mortgage before the credit crunch probably you'd have started off paying interest rates of about 6%, now you might be paying 3%. So even though some people's incomes are squeezed, a lot of them will have probably seen their payments come down by half.

He added, "take advantage of the current interest rate periods to start repaying the mortgage."

'FCA should look at mortgage mis-selling' says Which?

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.

We hope the FCA looks into this further to establish whether lenders made it completely clear to interest-only borrowers that they would need a repayment plan, to be sure that there wasn't widespread mis-selling.

– Richard Lloyd, executive director of consumer group Which?

FCA: 'Not clear borrowers understood mortgage deals'

The FCA report said some borrowers are facing a wake up call. Credit: Chris Radburn/PA Wire/Press Association Images

The Financial Conduct Authority 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 were not aware when they took out the deal that they needed a plan in place to repay the whole amount borrowed, not just the interest - and a further 6% were unsure.

However, those who said they were unaware of the need for a repayment strategy were more likely to have taken out the deal longer ago and just one in 40 people (2.5%) who said they were unaware still has no repayment plan in place.

Read: Warning for homeowners with interest-only mortgages.

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People on interest-only mortgages face 'wake up call'

A regulator has warned home owners on interest-only mortgages that they are facing a "wake-up call" because up to half of these borrowers will not have enough money to pay their loans back.

The Financial Conduct Authority (FCA) fears that consumers are under-estimating the scale of the problem.

Around 260,000 people are thought to have no strategy in place for repaying their loan.

Consumer campaigners also raised concerns that a "significant" number of people claimed to be unaware how their loan was meant to be paid back when they took the product out.

Mortgage lenders have agreed to alert at-risk customers to help them avoid "payment shocks".

Some people may have to sell their home to pay the loan back unless they control their repayment planning.

With around 2.6 million interest-only mortgages, some 10% of people have no plan for repayment.