Lenders have not pushed people who continue to pay their mortgage each month into addressing their remaining loan debt, Dean Mirfin, chief product officer at Key Retirement said during an update on the equity release market.

According to Key retirement, lifetime lending last year smashed through the £3bn mark, but it estimates that by the end of the year, more than 100,000 borrowers could potentially be in limbo and unaware of their options.

Mirfin said: “We know there are too many people who have gone past maturities that still haven’t done anything.

“They’re still paying the mortgage – because the lender hasn’t got a solution, the borrower hasn’t got a solution –  they’re both sat there waiting to see who moves first.”

However, the issue could come home to roost this year, when the Financial Conduct Authority (FCA) updates on its work with lenders and interest-only mortgages.

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Last year the regulator estimated 1.8 million people had outstanding interest-only mortgages and many did not have appropriate plans to pay them off.

Analysis carried out by Standard & Poors recently estimated that one in three interest-only mortgage holders are failing to pay off capital as deals end.

Mirfin said: “Lenders are not going to be able to sit on those loans forever – something is going to have to happen.

“I think we’re going to see some quite strong words from the FCA on the limbo customers – that action has to be taken.”

More solutions for interest-only borrowers

A changing mainstream mortgage market means there are more options for these borrowers, with smaller building societies doing more for the older market, according to Mirfin.

He said: “We’re now placing a lot more mainstream mortgages than we were a year ago, as a percentage of enquiries.

“More and more of those building societies, in particular, have got their head round how to lend better to older borrowers.”

Many people are turning to equity release to pay off interest-only mortgages, among other debts, data suggests.

Pensioners took a record £3bn out of their homes last year – a jump of almost £1bn from 2016.

And more than one in five people used the cash to pay off mortgages, with an average debt of £84,000, according to Key Retirement.

Another third used equity release to pay off loans and credit cards. Overall, retired homeowners took a typical £77,380 out of their home.

Mirfin predicts that the market is in for another growth boom in 2018, with lifetime mortgage lending to rise by around a third.

He said: “Expansion in the market is being driven by customer demand as retired homeowners’ confidence in making full use of their property wealth continues to grow.”