FCA warns holders of interest-only mortgages to plan ahead
A Financial Conduct Authority (FCA) thematic review of interest-only mortgages has raised concerns that shortfalls in repayment plans could lead to people losing their homes. Mortgage lenders are writing to customers prior to their mortgage maturing, but the FCA has found that engagement rates with firms are low.
Nearly one in five UK mortgages is interest-only, although the FCA said that, since its 2013 guidance, good progress has been made in reducing the number of people with interest-only mortgages. It said that lenders had taken ‘positive steps’ to engage with and help such customers, but as the number of maturities start to increase towards 2032, the FCA said it is important that lenders take time to review and, where possible, improve, their strategies.
The FCA’s executive director of supervision – retail & authorisations, Jonathan Davidson, said “We know that many customers remain reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons. We are very clear that people should talk to their lender as early as possible as this will give them more options when it comes to the next steps they can take.”