Lenders must do more to solve interest-only problem – FCA
The FCA is urging lenders to do more to tackle the issue of maturing interest-only mortgages with no repayment strategy.
Nearly one in five mortgage customers have an interest-only mortgage and the FCA is worried that shortfalls in repayment plans could lead to people losing their homes.
The regulator announced a thematic review of interest-only loans last April in its 2017/18 business plan.
Today the regulator published its findings. It says lenders have been proactive in contacting the 1.67 million interest-only customers in the UK.
However, the FCA says customer engagement rates are low. It says lender engagement is based on writing to customers, and this could be improved.
An FCA statement says: “Where lenders tailored their work to the different customer types identified, they were able to increase contact with those considered higher risk.”
The FCA also found that many customers found the process of following repayment options difficult.
The regulator also found problems with customers getting to speak to advisers, making multiple phone calls and repeating information previously provided.
FCA executive director of supervision – retail & authorisations Jonathan Davidson says: “We know that many customers remain reluctant to contact their lender to discuss their interest-only mortgage for a variety of reasons.”
“We are encouraged to see that lenders have taken positive steps to engage with and help their interest-only customers. However, as the number of maturities start to increase towards 2032, it is important that lenders take time to review and, where possible, improve, their own strategies.”
Full interest-only and part capital repayment mortgage accounts outstanding make up 17.6 per cent of all outstanding mortgage accounts.
The FCA review covered 10 lenders who represent around 60 per cent of the interest-only residential mortgage market.
It looked at how lenders are treating these customers to help ensure their mortgages are repaid at maturity.
Source: Mortgage Strategy