One in three credit impaired interest-only borrowers fail to repay on time

Ryan Bembridge

December 19, 2017

One in three borrowers with non-conforming interest-only mortgages are failing to repay the capital lump sum due at the end of their deal, S&P Global Ratings analysis of repayment data suggests.

It found that a third (36%) of loans due to mature between January 2016 and June 2017 failed to make the “bullet” payment at maturity and were still outstanding as at June 2017.

Borrowers in the South East of England are best off due to house price gains, though the opposite is true for those in the North West of England, Northern Ireland and Scotland.

S&P said there appears to be limited appetite to commence repossession proceedings against borrowers who have been paying interest on time but fail to pay the lump sum payment of capital.

Borrowers in these scenarios seem to be treated on a case-by-case basis but it is possible that some loans may only be repaid upon the death of the borrower.

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