Abbey issues interest only mortgage warning

29 November 2004
Abbey has warned consumers with interest only mortgages that they cannot rely on a rising housing market to pay off their loan.

Research from the bank has found that more than a third of borrowers (37 per cent) are currently not saving to repay the original amount borrowed on their interest only mortgage.

Abbey, the country's second largest mortgage lender, says that rising house prices have seen many people take out interest-only mortgages, but if property values fall then homeowners could struggle to repay these loans after a sale is made.

Three mortgage holders in ten currently have interest only policies, and more than one in three do not have savings in place to repay the value of the loan.

"I am surprised by the number of people leaving things to chance. Every mortgage is going to have to be paid back eventually and borrowers should never lose sight of that," said Gary Hockey-Morley, Abbey's director of mortgages.

"People should not go into an interest-only mortgage without a plan to repay, even if it means saving just small amounts to start with. Borrowers who haven't made plans should get in touch with their mortgage provider to seek advice as soon as possible."

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