"Around 10,000 customers a year are expected to come to the end of their interest-only loan with no way of repaying the lump sum and mortgage advisers are dealing with the fall out."
61% of advisers say they have seen a rise in enquiries over the past year, but more worryingly 63% have seen a rise in enquiries from customers who cannot repay the capital from their interest-only loan.
Half of advisers say they regularly deal with customers who have endowments which will not pay off loans while 17% have dealt with customers whose lender has already extended their repayment deadline.
Nearly a fifth (19%) of advisers say over-60s tell them they were unaware of the risks of interest-only loans while a third (33%) of advisers have dealt with customers who are suffering ill-health and cannot work and 27% have customers who have had to take early retirement.
Advisers forecast a 20% rise in demand for new interest-only solutions from lenders over the next two years.
CML data shows more than 300,000 borrowers have interest-only loans worth more than 75% of their homes and industry estimates show there are around 40,000 interest-only mortgages reaching maturity each year until 2032.
Will Hale, CEO of Key Retirement, said: “Around 10,000 customers a year are expected to come to the end of their interest-only loan with no way of repaying the lump sum and mortgage advisers are dealing with the fall out.
“The increase in enquiries highlights the real need for solutions and while the FCA consultation on retirement interest-only loans is welcome there is a need for solutions which is where equity release is playing a significant role.
“Selling up to pay off an interest-only mortgage can make financial sense but it is clear a lot of older homeowners do not want to downsize. Equity release should be part of all conversations with older homeowners and advisers who can recommend specialist support can help older customers.”
