Housing Loan PercentagePercentage share of housing loan
The client only has to pay interest until the end of the loan if the principal has to be paid back. Those kinds of loan help to buy a house that they could not otherwise afford with a conventional loan that begins repaying money from the beginning. Now, far less widespread in new mortgage lending, every fifth home loan outstanding is interest-free, many with defaults in redemption schedules.
An FCA audit in 2013 made suggestions on how to cope with "peaks" in due credit in 2027/2028 and 2032 when clients have to repay it. "Since 2013, good headway has been made in cutting the number of pure interest rate mortgages," said Jonathan Davies, EZV Chief executive, in a declaration.
Mr Paul Smee, Director of Facilities at UK Finance, the trade association representing home loan providers, said that the FCA reviews showed good headway by the UK housing finance community, with some areas for improvements. "Creditors have already enhanced communications with their clients and will do so to make sure that clients looking for the right options at the end of their pure interest rate mortgage will receive the right guidance and support," said Smee.
For the second year the FCA examined the industry, looking at 10 creditors representing about 60 per cent of the total banking industry. He said that there are currently 1.67 million full interest and partial principal repayments mortgages in UK bank deposits, or 17.6 per cent of all home loan transactions. A recent study shows that almost 26 per cent of clients with pure interest and partial principal repayments in the first half of 2017 came from sections of the populace with lower available incomes.