LV=: Holders of interest-only mortgages could suffer from house price drop

Date:Wednesday 19th November 2008
Author: Max Freedman

A "mortgage gap" among people with interest-only mortgages has been identified by financial services provider LV=.

The firm discovered that 45 per cent of the UK's interest-only mortgages, or 1.3 million, are not investing to pay off the capital on their loans, but merely the interest.

According to LV=, 41 per cent of interest-only borrowers, or around 530,000 people with loans totaling £30 billion, could suffer from falling house prices as they had intended to sell their homes to pay off their mortgages.

Mike Rogers, LV= group chief executive, said such borrowers should "seriously consider investing as much as they can now, and regularly, to help pay off the mortgage capital at the end of the term".

Meanwhile, Wakefield council in West Yorkshire is offering help to people having difficulty paying their mortgages.

The BBC reports the council's programme, expected to run for three years.

It is offering interest-free loans of as much as £15,000 to those in the greatest need.