Mr Evans said that more than half of affected customers will have less than 30 per cent outstanding on their loans and would therefore meet the typical conditions for a lifetime mortgage.
He added: “Wider acceptance and awareness of lifetime mortgages would make it easier for banks to manage interest-only risk and offer peace of mind to thousands of consumers who are facing payment shortfalls on their maturing loans.”
Mr Evans suggested that strict regulation and the requirement for professional advice on the products gave consumers added safety. He said: “Banks must resolve some compliance issues around moving borrowers on to the products as the conduct risk of not converting those who should be may in fact be greater.”
A spokesman for the Council of Mortgage Lenders said: “The CML toolkit sets out all the different options available and provides guidance for our members so they can step up communications with interest-only borrowers and encourage them to address the issue of shortfalls. Borrowers can find themselves in a huge variety of circumstances so the strategy for addressing the shortfall should be tailored to individual situations.”
Steve Laird, adviser for Belfast-based Carrington Wealth Management, said: “In principle this is something more banks should offer, although downsizing will remain popular. Interest-only borrowers only get to this stage if they haven’t addressed the problem in the meantime. They should ideally have converted part of the mortgage to repayment and set up a separate savings plan to service the loan.”
The Financial Conduct Authority publishing a review on interest-only mortgages earlier this month.
Andy Millmore, partner of City law firm Harbottle & Lewis, recently warned that advisers could face legal action if clients can prove they were mis-sold interest-only mortgages. Several providers pulled out of the interest-only market in 2012, including Coventry Building Society, the Royal Bank of Scotland, and its subsidiary NatWest, Nationwide and the Co-operative Bank.
90% of customers had a repayment strategy for interest-only mortgages
37% – believed they had a definite or possible shortfall
£22,000 – average amount owed
34% of mortgages that mature before 2022 will have shortfalls of at least £50,000.