The Financial Conduct Authority (FCA) has published findings from
the thematic review undertaken in relation to Interest Only mortgages.
Please read the questions and answers below to find out more.
The FCA is one of the UK Financial Services Regulators and their review of Interest Only mortgages reminds borrowers that it remains their responsibility to have a suitable plan to repay their Interest Only mortgage at the end of the term. The review also states that mortgage lenders should have a consistent approach to customer communications. Santander supports this guidance and has reminded all Interest Only customers to review their plans in each customers Annual Mortgage Statement customer mailing.
Santander is also developing ongoing customer communications and this will see Interest Only customers contacted, where applicable, within the next year or so.
You may be affected by this, if you have borrowing described on your mortgage paperwork, annual mortgage statement or flexible mortgage statement, as an Interest Only mortgage, or an older mortgage type known as an Endowment mortgage or ISA mortgage.
If you have an Interest Only mortgage, this means you are only paying the interest charged on your mortgage, but you are not paying back the original amount borrowed on a monthly basis.
Customers with an Interest Only mortgage will need to have a plan to pay back their borrowing through either an endowment, investment or other means at the end of their mortgage term.
Refer to your Annual Mortgage Statement sent between January and March 2013.
If you have a Flexible Offset mortgage you may receive statements more often, and you can check online.
Your mortgage statement will confirm your total borrowing, the interest rate for your mortgage loan or loans and the mortgage end dates.
If you are unsure, or cannot find your paperwork, please call us on 0845 605 3638.
You should review your annual endowment or investment statements and check the projected value. You may have a projected shortfall and you can discuss this with the plan provider or consult an Independent Financial Adviser (IFA). You can find one by visiting this website: http://www.unbiased.co.uk/.
Please note that an IFA may charge a fee.
Options will depend on your personal circumstances.
Things to consider include; your income, your current and future expenses, the value of your property, how much you owe on your mortgage, your mortgage term, if you have an endowment, other investments or savings and when you plan to retire, or if you have already retired. Some options include:
1. Change all of your mortgage from an Interest Only to a Repayment mortgage (a capital and interest mortgage) with, or without changing your mortgage term.
2. Make over-payments such as a lump sum payment on your Interest Only mortgage to reduce the capital outstanding, with the aim of paying it back by the end of the mortgage term. Please note that our minimum over-payment amount is £500 and on some products if you choose to repay your mortgage within an introductory incentive deal period, or you make a repayment of more than 10% of your mortgage balance annually, you may need to pay an Early Repayment Charge (ERC). These charges differ by product type and term. Please check your specific mortgage details before doing this.
3. Consider selling your property or any other assets you hold, to pay back your Interest Only mortgage and consider downsizing to a lower value property.
You can use an online monthly repayment calculator, https://www.moneyadviceservice.org.uk/en/tools/mortgage-calculator or call us on 0845 605 3638.
To use an online calculator you'll need to know your approximate mortgage balance, term and interest rate, all of which you can find on your latest mortgage statement. The figures are only a guide to what you might pay, the exact cost will depend on the particular mortgage you choose and how interest is calculated on your mortgage. If you have more than one part to your mortgage, you may need to perform several calculations.
Please call us on 0845 605 3638. Please have your mortgage account number to hand when you call, this can be found on your latest mortgage statement.
The National Debtline provides free confidential and independent advice on how to deal with debt problems over the phone or via email.
Call 0808 808 4000. Visit www.nationaldebtline.org.uk
The StepChange Debt Charity* which is a registered charity offering free, confidential advice and support to anyone who is worried about debt. They also offer advice around benefits people may be entitled to, for example Support for Mortgage Interest.
Call 0800 138 1111 Visit www.stepchange.org
*Calls to StepChange are free from all mobile networks.
The Money Advice Service, set up by the Government, offer free information and advice on money matters over the phone, via online chats or face to face.
Call 0300 500 5000, visit www.moneyadviceservice.org.uk or visit https://www.moneyadviceservice.org.uk/en/action_plans/make-an-interest-only-repayment-scheme
We would like our customers to consider their options and circumstances carefully to make an informed choice. You can also read on to find out other ways to get more information:
The Citizens Advice Bureau helps people by providing free, independent and confidential advice from over 3,500 locations across the country. Visit www.adviceguide.org.uk
Visit an Independent Financial Adviser. Find one at: www.unbiased.co.uk
Please note that an IFA may charge a fee.