You are here: Home - Mortgages - First Time Buyer - News -

A fifth of low income interest-only borrowers don’t understand product

0
Written by: YourMoney.com
02/08/2017
One in five low income interest-only borrowers do not understand the need to repay capital or appreciate the risk they may lose their home, a report reveals.

The Support for Mortgage Interest report from the Department for Work and Pensions (DWP) looked specifically at borrowing into retirement, particularly for interest-only borrowers.

It found that most customers “understand the nature of the product and the need to repay capital at the end of the term and have a strategy in place”, albeit that this may not be sufficient or certain (as in the case of inheritance) to repay capital. Just three in ten planned to repay with an investment vehicle.

However, a subset do not understand what’s required of them. The report claims many low-income borrowers who plan on extending mortgage terms, remortgaging or downsizing and taking on new borrowing at a reduced level may not be able to as a result of criteria changes following the Mortgage Market Review (MMR).

The research also revealed not enough is known about Support for Mortgage Interest (SMI) despite the provision delivering “real benefits” to those claimants who do receive it.

Of those borrowers who had claimed, many of whom had “experienced an adverse life event and income shock”,  SMI had “enabled them to maintain housing stability when they would otherwise have been unable to cover their mortgage payments and thus could have faced losing their home, which could have exacerbated already stressful personal circumstances”.

SMI is currently in the process of being reformed, as part of the wider Government Welfare Reform agenda. From April 2018, payments to lenders will now be treated as a state-backed loan to the mortgagor rather than a paid benefit.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Even the wealthy balk at the cost of advice

There is still a significant gap between what investors are willing to pay for financial advisers and what financial advisers...

Close