Lenders should take proactive steps to engage with borrowers who are facing an interest-only mortgage ‘timebomb’, according to a new white paper from Callcredit Information Group. The white paper – Interest Only Residential Mortgages: What happens when the music stops? – looks at the financial difficulties that borrowers may face when their mortgage reaches maturity. It explains that nearly two million interest-only mortgages will mature in the next 20 years, but many borrowers do not have sufficient repayment strategies in place.

Written by Juliet Coukham, director of retail lending strategy at Callcredit, and risk consultant Nick Royston, the white paper explores how interest-only mortgages have evolved – from their peak in the 1980s, when they were commonly sold alongside endowment policies, to the post-credit crunch era, when struggling borrowers typically switched from repayment to interest-only plans in order to reduce their outgoings. In many of these cases, borrowers are now facing a shortfall either due to an underperforming endowment, or by not having a sufficient alternative repayment plan....Read more here: New Callcredit white paper explores the interest-only mortgage a timebomb