Interest-only time bomb still exists
Just under a third (31%) expected to have to sell their home to pay off the outstanding capital, while 42% will have to face the music when their term ends within five years.
Gareth Shilton, Ocean’s spokesperson, said: “Interest-only has become a time-bomb because so many people took out the products to cut the cost of their mortgage, with no view of how they would repay the capital element.
“Borrowers who have an interest-only mortgage with no repayment plan need to take action.”
“It’s advisable to seek advice on whether they can overpay on their current interest-only deal, switch to a repayment mortgage, or use an ISA or pension to settle the capital payment.”
Nearly a quarter (22%) felt they weren’t given adequate mortgage advice in the first place when they took out an interest-only mortgage.
Shilton added: “While there is a place for interest-only mortgages, it is a specialised product that suits a small number of borrowers, rather than being the mass market product it became in the 1990s.
“For example, if you have a large family home that you know you don’t plan to stay in once your children have left home, then interest-only could make sense.
“Interest-only mortgages are now typically only being approved for borrowers who can demonstrate they have a repayment vehicle or pension pot that is forecast to repay the capital element. Usually, borrowers also need to have a significant deposit that gives them a big equity gap.”