UK facing an interest only crisis - Mortgages - News - Moneyfacts


UK facing an interest only crisis

UK facing an interest only crisis

Category: Mortgages

Updated: 28/03/2012
First Published: 28/03/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

More than a million and a half UK homeowners could be facing an interest only crisis.

New figures have revealed that of the 11.2 million households in the UK with a mortgage, a sizeable one in seven – the equivalent of 1.6 million homes – are simply paying off the interest on their home loans each month.

The scenario of well over 1.5 million homes only paying interest each month and not repaying capital or putting anything towards their overall mortgage debt has been described as a 'ticking timebomb'.

Even more worrying is that almost a third of this group (32%) are either in or coming up to retirement age (55+) while more than half are between the ages of 35 and 55 (53%).

"Many will be forced to downsize or continue to pay large mortgages well into retirement, when income is tighter than ever," said Karen Barrett, chief executive at

"The goal of becoming 'mortgage free' is becoming ever more elusive for some."

In addition, with lenders now clamping down on interest only mortgages, and slashing loan-to-value requirements to around 50% - 60%, many people currently on interest only deals could easily find that no similar options will be available to them when they come to remortgage in the future.

In recent weeks Santander, Halifax and Nationwide have been amongst the providers to change their interest only deals.

It means that hundreds of thousands of people could well struggle to boost their payments when their interest only period comes to an end.

On some mortgage deals, when homeowners revert back to repaying capital they also have to make up the funds lost during their interest only period.

It means that their new payments could become unaffordable, leaving them in danger of having their homes repossessed.

"With incomes squeezed, it's not surprising that many people are trying to save money by sticking to interest only mortgages, but this is a potential ticking time bomb," said Ms Barrett.

Find the best mortgage rate - Compare best selling mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

85% of remortgagors benefit from lower rates

Mortgage rates are among the lowest ever recorded, and in the case of fixed rates, they just keep falling! This means it’s never been cheaper to fix your mortgage rate for the long term, and unsurprisingly, remortgagors are taking advantage.

Does your mortgage lender owe you money?

Earlier this week, the financial watchdog revealed that hundreds of thousands of mortgage holders could have been overcharged by their lender. Are you one of the many who could be in line for a windfall?

Do you think your home will rise in value?

There’s been a lot of talk recently about the rate of house price growth slowing, but is it affecting your personal expectations? According to research, it could be, with fewer people now expecting the value of their property to increase.