Bradford & Bingley interest-only mortgage issue highlighted

Date:Wednesday 11th August 2010
Author: Susanna Kavka

A Bradford & Bingley interest-only mortgage has been cited as an example of the problems that can arise from such deals.

In a statement, the Society of Equity Release Advisers explained that it has dealt with a number of inquiries from financial advisers and solicitors about interest-only mortgage holders who have been threatened with repossession.

It highlighted the situation of a 63-year-old borrower with an interest-only mortgage from Bradford & Bingley, who was due to repay his loan in September.

Although the bank granted the consumer an extension until December, it said repossession proceedings would commence after that if the mortgage is not repaid.

The society said many lenders are taking an "aggressive" stance with interest-only borrowers who are unable to repay the capital sum at the end of their term.

In a speech given to the British Bankers' Association conference in July, Financial Services Authority chairman Lord Turner said cases of consumers relying on a future house sale to repay an interest-only mortgage are "inappropriately risky".