<
p>The FCA has issued a warning to lenders advising that they take control of their interest-only mortgage repayment plans, in order to counteract consumers defaulting on their loans.
The industry watchdog has also published research that has discovered that consumers were in a good position to repay interest-only mortgages when they mature.
The FCA will work alongside the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA) to ensure lenders prompt their borrowers into ensuring repayment plans are kept on track.
The regulator’s warnings aim to reduce the likelihood of some 600,000 borrowers, whose mortgages will mature before 2020, defaulting on their repayment schedule.
Martin Wheatley, Chief Executive of the FCA, said: “This is a landmark piece of work and it comes at a critical time: lenders, regulators, and borrowers need to ensure that they grasp the nettle now before it is too late.
“By acting now we are aiming to nip this problem in the bud.”
The research, which targeted those who have the least amount of time to impose counter-measures, found that under half of all interest-only borrowers were described as likely to have a shortfall
The Authority’s research shows that a third of potential shortfalls in the next seven years will be well over £50,000 and could come from relatively high income consumers.
Moreover, the FCA claims that over the next 30 years, 2.6 million interest-only mortgages will be due for repayment, with 10 per cent not having an effective mortgage repayment strategy.
This type of pre-emptive work is indicative of the way the FCA will act in the future, endeavouring to spot potential problem areas and prevent them from developing into bigger issues.
Martin Wheatley added: “Mortgage lenders have volunteered to contact their most at-risk customers with a ‘wake-up call’ to highlight the report’s findings and what they need to do without delay. We welcome this move and also the sector’s commitment to helping its customers try and find a solution - but people must engage with them.
“My advice to borrowers is to not bury your head in the sand – take action now. Understand the terms of your mortgage agreement and take control; work out if you can repay the outstanding amount when your mortgage matures. But you must engage with your lender to discuss how you propose to repay the outstanding loan.”
The FCA has issued a warning to lenders advising that they take control of their interest-only mortgage repayment plans, in order to counteract consumers defaulting on their loans.
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