Quarter of a million will struggle to refinance interest-only mortgages in next five years – Kensington

Quarter of a million will struggle to refinance interest-only mortgages in next five years – Kensington

Serious problems are being stored up in the UK’s financial system due to interest only mortgages, research by Kensington Mortgages has found.

 

By January 2024, a quarter-of-a-million Britons will have reached the repayment date for their interest-only mortgage without being able to find a new deal elsewhere.

The lender said that was about 15 per cent of the 1.7m British borrowers who currently have an interest-only mortgage.

The figures, which was calculated by Kensington’s predictive mortgage analysis technology Vector, removed the number of property owners who are expected to find a new mortgage or sell their house at a profit.

That left those who could reach the end of their interest-only mortgage and be served with a bill to repay the full sum.

For these borrowers, moving to a conventional repayment mortgage may be difficult, even if their property’s value has increased. Many will be nearing retirement, leaving them with fewer years to pay back a loan, and they may need to sell in order to raise the required funds.

The problem is expected to escalate in subsequent years, with almost 860,000 interest-only mortgages reaching the end of their term by the beginning of 2029. Roughly half of those borrowers could get to the end of their mortgage term without having found a new deal, according to the Kensington model.

Early last year the Financial Conduct Authority warned that thousands of consumers could lose their homes after conducting a review of the interest-only sector.

 

Problem lurking in system

Commenting on the findings, Kensington Mortgages chief executive Mark Arnold said: “This is a big problem that is lurking in Britain’s financial system. It’s important that people start thinking about this issue now, before thousands of homeowners find themselves facing a giant repayment bill that they are unable to deal with.

“The people who will be facing these bills will have a very different customer profile at the expiry of their mortgage than they did 25 years earlier when they took out these products. Many will have retired.

“Of those who are still working, many are likely now to be self-employed. Some may have moved from full-time work into the gig economy. They could still be fantastic borrowers, but these are families that won’t necessarily be able to tick all the boxes when they come to ask one of the big banks for a new loan.”

He urged people who may be affected by this to seek help and advice on their situation.

SOURCE: mortgagesolutions

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