Nearly one million people could have their homes repossessed as their interest-only mortgages come to the end of their term.
This week on Money Talk we look at why…
In the 1980’s and 90’s interest-only loans combined with an endowment policy (known as an endowment mortgage) were a popular choice for mortgage lenders and home-owners alike. Endowments were sold to the policy holders as a cover for the mortgage, with the potential for an additional lump sum at the end of the term. However, as time moved on, it became clear that many of these policies were not managed as they should have been.
Since 2000 these endowments have fallen from grace, and in 2012 the rules were tightened ensuring that interest-only mortgages would no longer be sold without repayment plans in place.
Unfortunately these changes have come about too late for some, and in September of last year Citizens Advice warned that an estimated 934,000 people could have their homes repossessed as they have no plan in place to pay off their interest-only mortgage as it reaches its end of term.