Average interest-only mortgages for over-65s are £43,000

Over-65s are paying off average interest-only mortgages of £43,000 outlining the scale of the interest-only time-bomb and the need for solutions, analysis of customer data by equity release lender More 2 Life shows.

Related topics:  Mortgages
Amy Loddington
25th February 2013
Mortgages
The lender is urging the Financial Services Authority – which is due to publish comprehensive research on the interest-only issue at the end of March – to force lenders to issue warning letters to customers.

It believes a system of Red, Amber and Green letters – modeled on the similar scheme for endowments – would help customers who do not have repayment plans to take action.

More 2 Life is making the call after customer analysis since launch found that more than four out of five customers taking out its Interest Choice Plan are using the money released to clear mortgage balances ahead of the fixed repayment date and switch to a lifetime mortgage without a fixed repayment date.

It found customers are taking out loan-to-value plans at an average of 22% despite being entitled to take a maximum average of 32%. The average amount released is £43,570.

Equity release lifetime mortgages enable customers to clear the capital owed ahead and to continue paying interest if they wish without having to sell their home or in extreme cases be repossessed.

Jon King, Managing Director of More 2 Life, said:

“The interest-only time bomb is purely and simply about the looming repayment dates for mortgages. Customers can pay the interest but they need to find substantial sums to clear the capital borrowed.

“The concern is that people hope for the best which is why regular warning letters from lenders will help concentrate customers’ minds. Lenders themselves already acknowledge it is a major issue and many are concerned.

“The FSA’s report in March may provide more data on how many customers do not have repayment plans but currently nobody has a clear picture of the issue. Red, amber and green letters would help provide that clarity and help customers.”
More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.