Bid to help customers pay home loan
The Council of Mortgage Lenders (CML) will help lenders to put "effective" strategies in place to tackle the issue at an industry conference in London.%VIRTUAL-SkimlinksPromo%
Banks, building societies and regulators will discuss "key issues" from the Financial Conduct Authority's (FCA) recent findings that people are failing to put enough money aside on up to half of the 2.6 million interest-only mortgages which are due for repayment over the next 30 years.
Estimates for the regulator suggest that around half these shortfalls will be more than £50,000. The FCA fears that consumers are underestimating the scale of the problem and lenders have agreed to alert their most at-risk customers to help them avoid ''payment shocks''.
Some borrowers could end up having to sell their home to pay the loan back if they do not take stronger control of their repayment planning. The initial focus is on people whose mortgages are set to finish before the end of 2020.
The CML has said that the most important issue for lenders in the interest-only market is exactly how to engage with customers and make sure they are fully aware of their obligation to repay the capital when the mortgage term ends.
A spokesman for the CML said that the conference had been called to enable industry bodies to share information and their experiences, using the FCA's report as a "springboard".
Interest-only mortgages have become much more thin on the ground since the boom years amid concerns about people not being able to pay back their debt. Toughened rules are also coming in next year to make sure borrowers can only take out mortgages they can afford to pay back and people will not be able to pin their hopes on house prices rising.
Lenders may be able to offer alternatives to some customers to help them avoid having to sell their home in order to repay the mortgage, but these will depend on the circumstances of the borrower and the lender's policy.
The FCA has told consumers that they must be prepared to communicate with lenders and cannot "bury their head in the sand".