The Mortgage Code Compliance Board has sounded a warning to borrowers with interest-only mortgages they could be forced to sell their homes if they have no way of paying back the loans.
The voluntary regulator, which is due to be phased out once statutory regulation begins at the end of October, says a borrower could get to the end of the mortgage and find themselves evicted as they cannot repay the capital, describing the option as “suicidal”.
MCCB head of communications Brad Baker says only one in 800 borrowers is affected and 94 per cent of those say they plan to do something about it such as use their savings, sell the property or switch to a repayment mortgage at a later date.
He urges borrowers to keep in touch with their lender or broker and be aware of their options.
The Council of Mortgage Lenders has published the results of a survey which reveals that more than 250,000 households have an interest-only mortgage which is not linked to an investment policy designed to repay the amount that was originally borrowed.
A total of around 14,000 households say they do not know how they will repay the loan.