The number of households with interest only mortgages has almost halved in six years as banks abandon this controversial corner of the house-loan market.
The city Watchdog regulated by the financial conduct authority (FCA) earlier this month started to see the issue of “mortgage prisoners” – homeowners who are trapped in expensive loans and not able to lay.
The FSA estimates there are 30,000 such “mortgage prisoners”, those on interest-only thought to be among the affected transactions.
According to new data from the Bank lobby group in Finance, currently 1.7 million outstanding interest-only mortgages, down 46pc in 2012. The total value of these loans down 37pc to £ positive flow 250 billion over the same period.
Interest only mortgages were popular before the financial crisis, but banks usually left them after this because they were counting on the rising value of the house to keep borrowers from falling into negative equity.
Mortgage explosion captured
Due to the tightening of mortgage rules brought in 2014, many of these borrowers are unable to switch to cheaper deals.
Jackie Bennett, Director of the mortgage loans in the UK Finance, said that its members tried to engage homeowners with interest-only mortgages to help with payment plans.
Miss Bennet said, “there is still plenty of work to do in the coming years to ensure that those other borrowers who still did not want to engage in promising repayment plans in place.
“We continue to urge all borrowers with interest only mortgages as soon as possible to contact their creditors, as before, they do so, the more options will be available.”
The FCA began to look for ways to help mortgage prisoners last month. The regulator is also considering other ways of improving the mortgage market.
He wants to make it easier for customers to compare mortgage products and find out if they are eligible for them. It is also the construction of a system of indicators to rate the mortgage brokers.