Big lenders have been told they can’t force elderly borrowers with interest- only mortgages to pay off their mortgage
Banks and building societies have been ordered to allow elderly borrowers with interest-only mortgages to stay in their homes.
Big lenders have been told they can’t force these homeowners to pay off their mortgage, even if it means the loans they were granted are never repaid.
Instead, the mortgage debt will be taken from the house sale when the resident dies.
The independent Financial Ombudsman Service has come across a number of cases where frail borrowers have been faced with selling their homes in their 80s and 90s in order to repay these deals.
Many borrowers who took out interest-only loans never saved to repay the capital.
Often, investments that were supposed to pay off the mortgage did not deliver as promised.
In one case, a man in his mid-90s was horrified to discover he would have to repay his entire mortgage in just a few years’ time.
He’d wrongly believed he could carry on making interest-only payments indefinitely.
He begged his lender, Yorkshire Building Society, to reconsider, but it refused, arguing it had given him clear information about the deal when he and his late wife had signed up for it around ten years earlier.
But the Ombudsman ruled that the lender had not properly taken into account the couple’s age or circumstances and ordered it to convert the loan into a mortgage without a set end.
A Yorkshire BS spokesperson says: ‘We look at each case on its own merits and make decisions based on the individual circumstances.’
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