Downsizing is ostrich approach to exit routes
The survey found that 35% of advisers said clients were relying on downsizing as their exit route which more 2 life said is akin to “burying your head in the sand”.
Jon King, managing director of more 2 life, said: “There is growing demand for answers to the interest-only crisis and clearly advisers are concerned that not enough is being done by the industry.
“Relying wholly or partly on downsizing to pay off interest-only mortgages is akin to burying your head in the sand as ultimately people may not want to move or may find it difficult to sell.”
Financial Conduct Authority figures showed 1.3 million interest-only customers faced potential shortfalls on their mortgages with homeowners aged 55 and over were the most at risk.
King said: “Mortgage lenders are starting to be more proactive in terms of communicating with customers but they also need to come up with more innovative solutions.”
Customer data from more 2 life demonstrated that more than 80% of customers taking out its Interest Choice Plan were using it to clear mortgage debts and releasing £43,570 on average.
He added: “Equity release has always been about people staying in their own home and people do it for the very reason that they do not want to move house.”
more 2 life’s research revealed 21% of advisers say clients are relying on investments to pay off interest-only loans while 17% are banking on endowments and 11% on savings.
Around 29% of advisers believed lenders and the FCA were doing enough to address the interest-only issue.
more 2 life said one solution to the interest-only problem was to use its Interest Choice Plan which allowed customers to move from a fixed-date repayment style mortgage to a lifetime mortgage where they only repay on death or on moving into long-term care.