Abbey advises against interest only mortgages

More than a million borrowers are not saving properly to repay their interest-only mortgage.

11:52 21 October 2004

A survey carried out by the high street bank Abbey, shows that more than a million borrowers are not saving properly to repay their interest-only mortgage.

First time buyers and people with a bad credit history are being warned that if they have an interest-only mortgage, they should make sure they are able to pay it off.

Gary Hockey-Morley, director of Abbey mortgages, said: "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. People should not go into an interest-only mortgage without a plan to repay."

The survey found that more than a third of those with interest-only mortgages have no savings in place to repay it, reports the Daily Mail.

A total of 37 per cent of people with a saving plan, running in conjunction with their interest-only mortgage, admitted that it would not accrue enough capital to repay the mortgage.

New regulations that are due to be brought in at the end of the month will ensure that lenders are unable to give an interest-only loan to people who are unable to repay it. At present, lenders are under no obligation to do this.