The Chief Financial Ombudsman has warned that masses of homeowners could face future debt problems after taking out an interest-only mortgage.

The Financial Ombudsman Service is an independent complaints committee who resolve consumer complaints and they have warned that people who took out interest-free mortgages a decade or so ago may not realise that their actual loan hasn’t been paid off – only the interest on it.

An interest-only mortgage means that you only have to repay the interest generated on your home loans, not the actual loan itself. This means that at the end of the agreed period the initial loan that you have taken out will not have been paid back, unless payments were increased.

Banks and building societies have recently clamped down on interest free mortgages, in the wake of the recession, to make sure that customers will be able to repay their debts.

Chief Ombudsman Natalie Keeney said: “We know there was a big boom of interest-only mortgages around 15 years ago.
“Our fear is when they mature, people will retire with big debts. We

Read more…