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The FCA & forerunner FSA have been concerned for some time about the amount of debt held under interest only mortgages and the banks lack of knowledge about how their customers intended to repay the mortgage at the end of the term. As such, they commissioned some research into the subject and have just published the results.
There are 2.6 million interest only mortgages due for repayment over the next 30 years and though 90% have a strategy to repay the mortgage, that leaves some 260,000 people without a strategy.
Of those with strategies to repay, around 37% estimate they will have a shortfall – however from its research, the FCA believes the true figure to be 48% and of those, half of these shortfalls are likely to be over £50,000.
Martin Wheatley, chief executive of the FCA said:
"By acting now we are aiming to nip this problem in the bud.
"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.
One way of helping to fund any shortfall would be to ensure you are on the best mortgage deal you can get and put the savings towards repaying the mortgage. Review your mortgage options with MoneyMaxim.