Around four out of five interest-only mortgage customers are relying wholly or partly on selling their house to pay off the capital, according to new research from equity release lender more 2 life.
Its nationwide study of mortgage advisers found 35% of advisers say clients are planning to downsize or sell their home to pay off loans while 43% plan to use a combination of downsizing plus other repayment vehicles.
More 2 life, which offers the Interest Choice lifetime mortgage, is warning that relying on downsizing is “akin to burying your head in the sand” and is urging lenders to focus on innovation. Its research shows 46% of mortgage advisers believe lenders and regulators are not doing enough to address the looming interest-only crisis.
Financial Conduct Authority (FCA) figures show 1.3 million interest-only customers face potential shortfalls on their mortgages with homeowners aged 55-plus the most at risk. Customer data from more 2 life demonstrates more than 80% of customers taking out its Interest Choice Plan are using it to clear mortgage debts and releasing £43,570 on average.
Jon King, managing director of more 2 life, said: “There is growing demand for answers to the interest-only crisis and clearly advisers are concerned that not enough is being done by the industry.
“Relying wholly or partly on downsizing to pay off interest-only mortgages is akin to burying your head in the sand as ultimately people may not want to move or may find it difficult to sell.
“Mortgage lenders are starting to be more proactive in terms of communicating with customers but they also need to come up with more innovative solutions. Equity release has always been about people staying in their own home and people do it for the very reason that they do not want to move house.”
More 2 life’s research shows 21% of advisers say clients are relying on investments to pay off interest-only loans, while 17% are banking on endowments and 11% on savings. Around 29% of advisers believe lenders and the FCA are doing enough to address the interest-only issue.
