Interest only mortgage payers have no plans to repay capital
December 3, 2008
According to a recent report many of those with interest only mortgages have no plans in place to help them to pay the capital on the mortgage in the future. The report shows that there are nearly three million people with interest only mortgages, and of these around 45 percent do not have any plans in place to help them to repay the capital on the mortgage.
The figures were released by Liverpool Victoria, and show that many of those that took out an interest only mortgage over the past five years did not provide details of any plans to repay the capital on their mortgage. With house prices having plummeted over recent months many think that those with interest only mortgages will be unable to meet their financial obligations.
The report showed that around 41 percent of interest only mortgage holders were planning to use the proceeds from the sale of their home to repay the capital on their loan. However, this could prove increasingly difficult given the huge drops in house prices, according to industry officials. One official said that many had become reliant on being able to sell their homes for a profit in order to repay the capital but that this was no longer a viable option for many.
He said: “A previously booming property market led many people to bank on being able sell their home, use the proceeds to pay off the mortgage, and still have enough left to buy another home. However, this strategy may have been overturned by current and predicted future falls in property prices.”
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