Lenders ‘meet commitment’ to contact all interest-only borrowers
Mortgage lenders have met their commitment made a year ago to contact borrowers with interest-only mortgages about how they plan to repay their loans.
The Council of Mortgage Lenders (CML) said a survey of its members found all borrowers who should have been contacted have been.
Last year, lenders pledged to contact interest-only borrowers whose mortgages are due to mature by the end of 2020 following a warning from the Financial Conduct Authority (FCA) that some risked losing their homes because they did not have a repayment strategy in place.
According to the CML, around 30 per cent of customers contacted have so far responded. Of these, four out of five already have a clear plan.
Among those who did not, the survey found that the solutions and approaches lenders are offering typically include term extensions, permanent conversions to capital and interest, and overpayments.
The latest findings follow CML research published earlier this year showing a significant fall over the past year in both the number and the value of interest-only mortgages.
There was a 12 per cent drop between quarter four 2012 and quarter four 2013 compared to the same period a year earlier when there was a reduction of less than 2 per cent.
Martin Wheatley, chief executive officer at the Financial Conduct Authority, said: “This forward looking and consumer-at-the heart type of action is a prime example of a model demonstrating good conduct outcomes and putting customers first; it’s good to see that real progress is being made. What I am particularly pleased with is how industry, regulator and consumer have come together to address this problem as one in a collaborative way. It’s too soon to declare success, but these are encouraging findings.
“Everyone needs to keep the momentum going. Our advice for borrowers is unchanged: you must with engage with your lender; this is a shared problem and you need to work together to resolve it.”
CML director general Paul Smee said: “We are pleased to report that lenders have met their initial commitment to contact interest-only borrowers whose mortgages are due to mature by the end of 2020. But we all recognise that this is just the start of a long term, continuous communication programme.”