11,000 homeowners are at risk of losing their properties after being trapped on interest-only mortgages they can not afford to repay

via Lizz News:

11,000 homeowners are at risk of losing their properties after being trapped on interest-only mortgages they can not afford to repay

More than 11,000 families are at risk of losing their homes this year after being trapped on interest-only mortgages they cannot afford to repay.
New figures reveal that more than 80,000 interest only mortgages will come to the end of their term in the next 12 months – but more than one in eight of these borrowers will have no way to pay back the remaining debt they owe to the bank.
Around 11,200 individuals face throwing themselves on the mercy of their banks because they have not been able to repay the capital of the loan either because investments they planned to pay off the deal have failed, or because they haven’t squirreled away enough money to cover what they borrowed.
With a traditional capital and repayment mortgage, a homeowner will make monthly instalments to pay off their loan. At the end of their mortgage term – typically 25 years – they owed nothing to the bank and the house is their own.
More than 11,000 families are at risk of losing their homes this year after being trapped on interest-only mortgages they cannot afford to repay
With an interest-only deal borrowers only paid off the interest on their mortgage, but never made payments to cover the actual loan they had borrowed from the bank. It means that when the deal ends they must find money to pay back the capital they originally borrowed.
Millions of these deals were sold in the 1980s and 1990s as homeowners were told by salesman that rises in house prices would more than cover the debt they owed to the bank.
At the height of the frenzy as many as four in five deals were interest only.
But with no means of repaying this money they must beg the bank to allow them to continue making repayments and to hold off demanding the capital until their house is sold when they die.
Wes Streeting, an MP who sits on the Treasury Select Committee said: ‘It seems outrageous that banks have been able to profit enormously from these loans.
But more than one in eight of these borrowers will have no way to pay back the remaining debt they owe to the bank
‘By contrast elderly pensioners who signed up to these deals now face being turfed out of their homes because the banks show scant regard to them when they need it most.’
And Stephen Lloyd, the Eastbourne MP who has campaigned on the issue of interest-only loans, said: ‘Tens of thousands of families face losing their homes after being snared by this desperate situation. This is unacceptable. If someone can keep up their mortgage whatever their age, they should be allowed to stay in their home securely. It’s what living in a civilised nation is about and is what people deserve.’ Around 1.8 million borrowers have an interest-only deal – around one in five of all mortgages.’

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