Ticking time bomb or damp squib?
Martin Reynolds is managing director of SimplyBiz Mortgages
Not another Interest Only Time Bomb blog you ask. Well sort of – but hopefully without the hype.
Last week BDRC Continental issued their Mortgage Achilles report where they produced, among other things, the following facts:
– 1.8m homes in the UK are on interest only
– 700,000 (39%) have no method of repaying the capital at present
– 400,000 have a plan but it potentially will not clear all the debt
Also interesting was how those without a plan intended to clear the loan:
– 23% plan to switch to repayment at some point
– 16% plan selling the property or using cash savings
– 26% did not currently know how they were going to repay the loan
Whilst the report is informative, it is not overly enlightening in regards to new news – although it does provide a breakdown of previous data.
CML issued its thoughts in March 2012 in its ‘News & Views’ – bulletin, where it felt the concern was overstated.
Their figure of 3.9m homeowners is over twice that of BDRC but highlights that the data has a long tail.
What is of importance though are not the figures of either but the end consequences for your clients which are:
There are a number of interest only customers with no repayment vehicle, there are some with a potential plan and there are others with no plan at all.
So the big questions therefore are:
– How many of your clients fit into each of those categories?
– How are you working with them to remedy this?
– How are you documenting this for future reference?
This is situation that will not go away.
It may not be the ticking time bomb that the headlines are promoting, but that does not mean we can sit on our hands and do nothing.