One in 10 over-55s UK homeowners are still paying interest-only mortgages and while the majority are confident of clearing the debt substantial numbers fear they will not be able to.
The study by over-60s property experts Homewise shows that the average amount owed by 1.4m or so over-55s with interest-only mortgages is around £91,000 with one in seven owing more than £150,000. But 17% of interest-only borrowers aged 55-plus – equivalent to 24,300 – admit that they will be unable to clear the debt.
The Council of Mortgage Lenders estimates that at end of last year, there was around 1.7m pure interest-only mortgages outstanding, down from around 3.2m in 2012, with another 500,000 part repayment and part interest-only loans, reflecting the fact that the Financial Conduct Authority has campaigned in recent years to help borrowers focus on repaying loans.
Mark Neal, managing Director at Homewise, said: “The mortgage industry has made massive strides in tackling the interest-only issue and has helped borrowers to take action.
“The good news from our research is that the majority of over-55s who have interest-only loans have plans in place to ensure they can pay off the capital but there are still substantial numbers who do not appear to know what they will do.
“They have a range of options including selling their home and downsizing but that may not be suitable for all. The Home for Life plan can help by enabling over-60s to move to a new home under a lifetime lease and release money to clear interest-only debts.”