Interest-only mortgage customers could be in trouble if they fail to put aside enough money to pay back what they owe.
A growing mortgage gap has been highlighted in a new survey, which shows that a large number of homeowners with interest-only mortgages have no specified investment vehicle in place to pay off the capital on their loan.
Conducting the research on behalf of the insurance company LV=, the Centre for Economics and Business Research found that 45 percent of the UK's 2.9 million interest-only mortgage holders could struggle to repay what they owe once their mortgage term comes to an end.
Of these, four out of ten are relying on the sale of their property to generate the capital they need. But, as LV= points out, house prices have fallen significantly over the last year and could fall further still, which means these homeowners could face serious financial problems if they are unable to find the extra money from somewhere else.
Mike Rogers, chief executive of LV=, said: "We're concerned that so many of the homeowners we polled appear to have an over-optimistic outlook on their ability to pay off their mortgage capital at the end of the term. Or worse still they are turning a blind eye to the issue."
A recent survey by Impartial.co.uk reveals that many homeowners are underestimating the how far the value of their property has fallen in recent months. Land Registry figures show that house prices fell 6.1 percent during the third quarter of the year, but the average homeowners thinks they dropped just 0.1 percent.
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