Lenders meet 2020 interest only commitment
The commitment, given by mortgage lenders to the Financial Conduct Authority, was to contact interest-only borrowers whose mortgages are due to mature by the end of 2020 about how they plan to repay their loans.
The Council of Mortgage Lenders said the only notable exceptions in the communication programme were those with small balances where there is little material risk, and those with whom lenders were already in contact.
As well as sending reminders and mailings requesting the customer’s written response (including questionnaire responses) lenders have been making telephone calls, face-to-face meetings and even home visits.
A CML spokeswoman said: “Although we do not have a comprehensive picture yet of the most successful contact strategies, overall it seems those that include a specific call to action on the part of the customer generate higher response rates.
“Among those borrowers who have responded, around four out of five already had a clear plan. Among those who did not, the survey found that the solutions and approaches lenders are offering typically include term extensions, permanent conversions to capital and interest, and overpayments.”
CML director general Paul Smee said: “So far, around 30% of customers who have interest-only mortgages maturing by 2020 have responded to their lender on their repayment plans. This is an encouraging start, but also highlights the challenges of achieving effective two-way communication.
“If you have an interest-only mortgage due to end before the end of 2020 and you have not yet responded, it is important to communicate with your lender, even if you know your plans are on course. If they are not, your lender will want to work with you to help minimise any difficulties.”
Martin Wheatley, chief executive officer at the Financial Conduct Authority, said: “This forward looking and consumer-at-the heart type of action is a prime example of a model demonstrating good conduct outcomes and putting customers first; it’s good to see that real progress is being made. What I am particularly pleased with is how industry, regulator and consumer have come together to address this problem as one in a collaborative way. It’s too soon to declare success, but these are encouraging findings.
“Everyone needs to keep the momentum going. Our advice for borrowers is unchanged: you must with engage with your lender; this is a shared problem and you need to work together to resolve it.”