Interest only mortgages put those who take them out at risk of losing their home. They payments are lower but most borrowers do not have a concrete plan for paying down the principal once the interest-only terms are over. According to the article, the number of outstanding interest-only loans has decreased from 3.2 million to 1.9 million between 2012 and 2017. This is a promising trend, but industry insiders worry that those still stuck in the loans are in danger of repossession and thus represent a “ticking time bomb” still out there ready to blow.
Key Takeaways:
- Interest only mortgages are a way for UK homeowners to initially afford a home, as they are typically less costly (at the beginning) than other types of mortgages.
- Upon expiration of the loan, many homeowners face the real possibility of repossession of their homes.
- Interest-only bookings have shrunk, however, with approximately a third less less of them appearing on record since 2012.
“It is believed that one in 10 households do not have an appropriate strategy to repay them once the loan expires.”