Mortgages  

Broker warns of shortfalls in £33bn mortgage timebomb

Broker warns of shortfalls in £33bn mortgage timebomb

Half of borrowers could be experiencing a shortfall when their interest-only mortgage matures, a broker has warned.

Brightstar Financial anticipates 2.6 million interest-only mortgages to be due for repayment within the next 30 years, with 7 in ten held by customers over the age of 45.  

This means the broker expects £33bn worth of interest-only mortgages to be due for maturity by 2032, and for half of these borrowers to have a shortfall.

Brightstar published a guide on interest-only mortgages and later life lending to aid brokers in finding an appropriate solution for clients affected by the loan maturity.

Michelle Westley, head of marketing at Brightstar Financial, said she expects many more borrowers to find they reach the end of their interest-only mortgage term without a plan as to how they repay the balance in the coming years.

She said: "Which presents brokers with a great opportunity to advise their clients on the best solution for their circumstances.

"Fortunately, most of those homeowners will have significant equity in their property and the options for releasing this equity are becoming more competitive and accessible.

"Our guide will give brokers information on how to recognise the opportunity and make the most of this growing market."

The Mortgage Market Review in 2014 imposed tighter restrictions on interest-only lending, requiring lenders to only provide new interest-only mortgages to borrowers who could prove a repayment plan.

Will Hale, chief executive at equity release adviser Key, said while some borrowers had repayment vehicles in place, others may have no obvious solution available to them having taken no proactive steps to engage with their lender.

They could face serious issues when their mortgage matures, he warned. But he said they may be able to turn to equity release products instead.

He said: "Equity release has been, and continues to be, a solution to this problem for many of these customers and it is excellent news that recent product innovations through retirement interest-only mortgages or specialist later life mortgages can provide another realistic option for even more people faced with this difficult situation." 

rachel.addison@ft.com