Taylor Scott International News
Concerns have been growing in the UK over the number of home owners with interest only mortgages who do not have enough finance to cover themselves when their loan comes to an end. But new research shows that over the past two years the total number of interest only loans outstanding has fallen by over a quarter with a 16% reduction in the number of loans over the past year alone. According to the Council of Mortgage Lenders the progress that has been made and the ongoing steps that are being taken by the industry to check that borrowers with interest only mortgages have plans for how they will repay their loans at maturity is encouraging. As at the end of 2014, CML members reported that there were around 1.9 million pure interest only mortgages outstanding, and around 460,000 part interest only mortgages. This was around 300,000 fewer pure interest only mortgages and 160,000 part interest only mortgages than a year earlier. The CML research suggests that a quarter of this reduction is down to natural attrition, which is loans maturing and repaying at the end of their term. Around a third can be attributed to full redemption of loans not set to mature until at least 2028, suggesting that many borrowers are taking action well before problems could arise. This also suggests that a significant group of borrowers are successfully remortgaging onto full repayment terms without falling foul of new affordability rules. Of those loans that have matured, few have failed to repay. In total, there are fewer than 16,000 loans outstanding which have matured but not yet repaid or restructured and previous experience shows that most such loans subsequently redeem within a relatively few months of maturity. However, the CML said there is no room for complacency and members are continuing to think about the options for customers who may not be able to repay their mortgages. This includes more partnering with third party advice providers, including equity release firms, and product innovations that may help some borrowers. The CML also pointed out that it remains a challenge to get borrowers to respond to lender contact designed to help them plan for their mortgage's repayment at maturity. Lenders contacted around 427,000 interest only customers between April and December 2014, about 17% of all interest only borrowers. During 2014, the focus of lender communications moved beyond those whose mortgages are due to mature by 2020, and included borrowers whose mortgages are not due to mature until after this. Response rates by borrowers varied. Around 27% of those contacted whose mortgages are due to mature between 2021 and 2028 responded but only a disappointing 2% of those whose mortgages are not due to mature until after 2028 did. However, where lenders did succeed in getting customers to respond, 86% of those who responded had a repayment strategy, and those who did not appeared responsive to making changes such as switching to repayment terms,… Taylor Scott International
Taylor Scott International, Taylor Scott
