While solutions are still up in the air, the problem is clear: there are many that find themselves trapped by an interest only mortgage. Instead of feeling like there’s no way out, there is now a proposal going around that lenders should offer extensions to the mortgage scheme. This would effectively create some lifetime mortgage situations.
If the proposals are approved, the lender would be forced to generate a whole new contract with the consumer, as per equity release rules.
Equity release? Yes, definitely. This is something that could be a total gamechanger, so you might want to keep track of the news over the next few weeks.
The FCA feels that lenders who force borrowers into a new capital repayment scheme are being unfair, but it might not be an idea whose time has come just yet. Many feel that interest-only mortgages are something that people went into with their eyes wide open. If you don’t do them right, the entire house of cards can easily come crashing down — causing a lot of problems in the long run.
It’s always a safe bet to realize that you have to look at things from a different perspective. Lenders already have options available for borrowers that feel they’re in hot water, but the FCA stepping in would create an entirely new layer of consumer protection.
The question is — do UK consumers really need that protection?
More lenders getting into the equity release market could create more options, but only time will tell if this is a good thing or not.
For the time being, if you find that your interest only mortgage is getting out of control, you need to actually contact your lender. Explain to them what’s going on. If this is just a temporary bump in the road, you’ll find that your lender is more than willing to negotiate with you. If you’re in the market for a remortgage option, you should definitely shop around. If things are bleak, then you will need to explore options — do you need to declare bankruptcy? Do you need to work on an IVA? The point here is that you definitely don’t want to just hope everything will be okay. You need to break through and move on to bigger and brighter solutions. Good luck!