A large number of people who are taking out interest-only mortgages don’t know how they’re going to manage the debt.
That’s the conclusion of a new FSA survey that revealed a combined total of 15% of consumers either don’t know how they will pay their arrears or have strategies that may not clear the amount owing.
Clive Briault, FSA managing director of retail markets said there’s nothing wrong with interest-only mortgages but instead, people are being naïve in what they can afford to borrow. He said, “Consumers must be very clear about how they are going to repay the loans they take out. Consumers' repayment plans need to be realistic and robust. Consumers should not, for example, assume that house prices will continue to rise at the rate seen in recent years."