Those on interest only mortgages appear to have unrealistic expectations according to ne research conducted on behalf of HML.
The survey found that 57.6% of those with interest-only mortgages are confident UK house prices will increase sufficiently for their debt to be redeemed at the end of the mortgage term. The data was obtained by questioning more than 1,000 people which revealed that only 30% of borrowers holding interest-only mortgages were confident they have a proper plan to repay the mortgage loan.
HML concludes that the awareness of repaying an interest-only mortgage is not an issue among borrowers.
It found that 91.6% of interest-only borrowers clearly realise know they need to repay the full mortgage debt at the end of the term. A majority (59.7%) have some form of plan but 4 in 10 mortgage holders do not. Worryingly, of half of those questioned without a repayment vehicle just 50% were confident the whole debt would actually be repaid.
The research is problematic, given seven out of ten people with interest-only mortgages need help to repay the capital at the end of the mortgage term.
HML chief executive Andrew Jones said: "There is an unrealistic expectation amongst a significant number of interest-only borrowers that annual house price inflation will return to double digits and dig them out of a sticky situation. There is a challenge to help consumers understand there isn't going to be a return to runaway house price rises anytime soon and it is therefore their responsibility, along with lenders, to make appropriate arrangements to address the issue"
