Nearly a million homeowners have no way of paying off their mortgages because they opted for interest-only loans, according to CitizensAdvice. The new figure is much higher than previous estimates. 934,000 owners did not have a plan for how to pay back the money at the end of the mortgage term. 432,000 have not even thought about the issue.
It warned that time was running out for some to organise their finances. They faced having to sell their homes or even have the property repossessed if they were unable to find other funds, the charity said. Millions of buyers were sold interest-only mortgages before rules were tightened up three years ago. Without the need to pay back some of the loan each month on top of the interest, they could borrow more to buy their homes.
"People buy a home for stability, but interest-only mortgages have forced many into a financial black hole," says the charity's chief executive, Gillian Guy.
The first sizeable wave of repayment problems is expected to appear in 2017-18, when endowment mortgages sold in the 1990s reach their peak period of maturing. A decade later, in 2027-28, the surge in interest-only mortgages taken out from the early 2000s reaches a high point. And the final peak comes in 2032 when the wild lending to people who could barely afford the interest, just before the credit crunch, has to be dealt with.