By Jonathan Davies
Nearly one million homeowners will never be able to pay back their mortgages because they chose interest-only loans, according to Citizens Advice.
Citizens Advice said 934,000 currently have no plans on how they'd pay back the funds at the end of the mortgage term. The figures are much higher than those reported by the Financial Conduct Authority (FCA) - two years ago, it estimated that just 260,000 were in the same situation.
However, that huge gulf in numbers may be down to conflicting reports of how many interest-only loans there actually are. The FCA claims around 2.6 million, but Citizens Advice believes there are around 3.3 million.
The charity said the near one million people are running out of time to organise their finances.
Many of those involved say they weren't really aware that they'd have to pay back the full mortgage amount at the end of the term. Interest-only mortgages see borrowers only pay the interest every month, with the full amount owed at the end of the term.
Millions of buyers were sold interest-only mortgages before rules were tightened around three years ago.
But of the 934,000 borrowers suggested by Citizens Advice, the charity said more than 400,000 of those have not even thought about having to pay back the mortgage.
"People buy a home for stability, but interest-only mortgages have forced many into a financial black hole," said Citizens Advice chief executive, Gillian Guy.
The first wave of people having to face the problem is expected to cut in 2017-18 when mortgages taken out in the 1990s come to an end. The next wave comes 10 years later as mortgages taken out in the early 2000s come to fruition. The final wave is likely to come in 2032 when mortgages given to people who could barely afford the interest payments alone were handed out shortly before the financial crash.
A spokesman for the FCA said: "We expect firms dealing with interest-only borrowers to discuss repayment strategies and propose solutions where there are no plans in place.
"While we have seen many firms progress with this, borrowers must also engage with their lenders now to resolve it, we will also continue to monitor lenders as part of our normal supervisory work."