Research from analyst BDRC Continental suggests 39 per cent of interest-only borrowers holding a total mortgage value of £75bn have no repayment plan, while a further 22 per cent holding mortgages worth a collective £45bn have an investment plan which is not on course to clear their debts.
Only one in three have an investment plan that is on course to clear their mortgage, representing total mortgage value of £65bn.
Last year, interest-only mortgages sprang into the public consciousness after Martin Wheatley, incoming head of the Financial Conduct Authority, referred to the market as a “ticking time-bomb”.
Despite some industry speculation, the Financial Services Authority stopped short of issuing a blanket ban on the loans. Some lenders said they would have preferred to see an outright ban on the products, with many already pulling out of the market or cutting their offering.
Tony Wornell, director at BDRC Continental, said: “Everyone with an interest-only mortgage needs a credible repayment plan.
“Changing to a repayment mortgage is the most certain solution but if that is not possible, borrowers could consider overpaying the mortgage or building up cash savings if they do not like the idea of an investment plan.”