The financial services regulator is worried that the hundreds of thousands of homeowners with an interest-only mortgage could be at risk of losing their home.

Hundreds of thousands of homeowners could be at risk of losing their homes by ignoring how they will pay off their mortgage, a regulator has warned.

Nearly one in five mortgage-holders has an interest-only home loan, meaning they would need savings or other funds to pay a final lump sum.

The Financial Conduct Authority (FCA) said the end of these mortgage terms would peak in the next 10 to 14 years.

Many borrowers were ignoring letters from lenders, it found.

Interest-only deals allow borrowers to pay off the amount borrowed only when the mortgage term ends, usually after 25 years, but there is concern that a host of homeowners do not have plans in place to pay the final bill.

The FCA said that 1.67 million full interest-only and part-capital repayment mortgages were still outstanding, representing 17.6% of all mortgages in the UK.

One peak of these final bills has come in the past year or so, for those who took out endowment policies in the 1990s and 2000s.

Less affluent, middle-aged homeowners who often converted to interest-only deals in 2003-09 – who are concentrated in the South West, East and North West of England, as well as London and the West Midlands – will see their final repayment demand come in 2027-28.

The regulator said that lenders had improved their communications with customers at risk since its initial report on the issue five years ago.

However, there were still concerns that some customers may have been incorrectly reassured about their plans by non-specialist staff.

Action needed

The FCA had more concerns over the reaction of borrowers who, for a variety of reasons, were ignoring letters from their lender.

Some believed that they had an adequate repayment plan in place, while others were simply burying their head in the sand. Some had little trust in their lender, so were suspicious of the letters.

The FCA urged these borrowers to talk to their lender as early as possible, otherwise they would restrict their options over time of paying off their mortgage.

“We are very concerned that a significant number of interest-only customers may not be able to repay the capital at the end of the mortgage and be at risk of losing their homes,” said Jonathan Davidson, executive director of supervision at the FCA.

Hannah Maundrell, from comparison service, said: “You may be able to remortgage your property, extend your mortgage to give you time to raise the money to pay it back or look into taking out another mortgage from a different lender.

“If you’re at risk of losing your home, there are government schemes that could help. The key thing is to pick up that phone and talk to your lender.”

Mortgage approvals at the lowest for five years


The number of mortgages given out by UK banks has dropped to its lowest level for nearly five years, according to industry figures.

UK finance said there were 36,115 seasonally-adjusted mortgage approvals in December, the lowest number since April 2013.

The drop occurred despite a reduction in stamp duty for first-time buyers, which took effect in November.

However experts said it was too soon for that to have made a difference.

Nevertheless, some borrowers may have been put off by the increase in standard variable rate mortgages in December, following the Bank of England’s decision to raise base rates to 0.5% in November.

mortgage approval chart

“December’s marked drop in mortgage approvals suggests that already pressurised housing market activity took a further hit from the Bank of England raising interest rates in early November,” said Dr Howard Archer, chief economic adviser to the EY Item Club.

“Housing market activity has been under pressure from squeezed consumer finances and fragile confidence.”

During December, UK banks approved £7.02bn in mortgage lending – the lowest amount since September 2016.

The Brexit debate continues… will we be worse off or not?

The government says it will not publish a leaked report document predicting an economic hit from Brexit.

Brexit Minister Steve Baker said the document was at a “preliminary” stage and releasing it in full could damage the UK’s negotiations with the EU.

According to BuzzFeed, the report said growth would be lower in each of three different Brexit outcomes than if the UK had stayed in the EU.

Labour has called for it to be published and debated in Parliament.

According to Buzzfeed, the leaked document, titled EU Exit Analysis – Cross Whitehall Briefing and drawn up for the Department for Exiting the EU, suggests almost every part of the economy would suffer.

It looked at scenarios ranging from leaving with no deal to remaining within the EU single market.

Responding to an urgent question in the Commons, Mr Baker said the document was “not anywhere near being approved by ministers” and that ministers in his team had only just seen it.

He described the document as a “preliminary attempt to improve on the flawed analysis around the EU referendum” and said it did not assess the government’s preferred option of a bespoke free trade deal.

It “does not yet take account of the opportunities of leaving the EU”, he said, adding that civil service forecasts were “always wrong, and wrong for good reasons”.

‘Highly embarrassing’

Responding to calls for it to be published, Mr Baker said MPs would get as much information as possible before they vote on the final Brexit deal but said: “We don’t propose to go into these negotiations having revealed all of our thinking.”

And as Brexiteer MPs hit out at the leaking of the document, he said there was “clearly” a campaign to overturn the 2016 EU referendum by some people in the media and the House of Commons.

One Conservative MP, Antoinette Sandbach, told Mr Baker she took exception to being told it was not in the national interest for her to see the document.

And responding for Labour, Brexit spokesman Sir Keir Starmer said the emergence of the report was “piling absurdity on absurdity” with the government having previously denied the existence of Brexit impact assessments.

Scottish First Minister Nicola Sturgeon said: “For months, Theresa May’s government have refused to produce any detailed analysis of the potential impact of various Brexit scenarios – now we know why they have so desperately engaged in a cover-up.”

The BBC understands the Treasury contributed to the document but sources say it is part of a much wider range of work going on in Whitehall.

The report suggests UK economic growth would be 8% lower than current forecasts, in 15 years’ time, if the country left the bloc with no deal and reverted to World Trade Organisation rules.

It says growth would be 5% lower if Britain negotiated a free trade deal and 2% lower even if the UK were to continue to adhere to the rules of the single market.

All scenarios assume a new deal with the US.

Conservative MP Philip Davies blamed the report on “London-centric remoaners” in the civil service “who didn’t want us to leave the European Union in the first place and put together some dodgy figures to back up their case”.

Earlier Conservative MP and leave campaigner Iain Duncan Smith told BBC Radio 4’s Today programme the document should be taken “with a pinch of salt” as almost every single forecast on Brexit has been wrong.

A government source said the report “contains a significant number of caveats and is hugely dependant on a wide range of assumptions”.

The FDA, which represents senior civil servants, reacted angrily to Mr Baker’s dismissal of the leaked study.

“We have just witnessed the extraordinary scene of a serving minister telling the House that, whatever analysis his own department comes up with, he simply won’t believe it,” said the union’s general secretary Dave Penman.

Liam FoxImage copyrightREUTERS
Image captionLiam Fox says some Tory colleagues must “live with disappointment”

Meanwhile, International Trade Secretary Liam Fox has denied telling Tory Brexiteers to prepare for disappointment.

Speaking to The Sun about pressure on Prime Minister Theresa May, he criticised Tory MPs involved with negative briefings, saying “nothing that would happen would change the parliamentary arithmetic”.

“We don’t have a working majority, other than with the support of the Democratic Unionists, and we need to accept the reality of that. I know that there are always disappointed individuals but they’re going to have to live with disappointment.”

Mr Fox told the BBC his warning was to Mrs May’s critics that they will be “disappointed” in their efforts to topple her or secure cabinet positions for themselves.