FSA recommends planning for interest-only mortgages

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FSA recommends planning for interest-only mortgages

Homebuyers who opt for an interest-only mortgage have been warned by watchdog the Financial Services Authority (FSA) that they could be running the risk of not planning sufficiently for meeting the repayments.

Research by the FSA has shown that one in ten people have no idea or only a rough idea of how they plan to pay back their loan, highlighting a worrying trend.

The worst case scenario should a homeowner fail to make their repayments is repossession of their property and some people quizzed for the survey were found to be unaware of this fact.

Clive Briault, managing director of retail markets at the FSA, remarked: "There is nothing wrong with interest-only mortgages. However, consumers must be very clear about how they are going to repay the loans they take out.

"Repayment plans need to be realistic and robust. Consumers should not, for example, assume house prices will continue to rise at the rate seen in recent years."

It was lower-income homeowners who were more likely to not have a definite plan how to pay back their interest-only mortgage, according to the FSA.

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