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Interest-only timebomb looming; DAILY POST OUR VIEW.

THE consequences of the reckless mortgage lending that culminated in the financial crash in 2008 are numerous. When the housing bubble inevitably burst prices crashed, homeowners were left trapped in negative equity and Governments burdened with debt as they bailed out banks and recession slashed their income.

Now the latest financial fiasco to be revealed is that one in five home-owners in Wales with interest-only mortgages are facing a payment timebomb. In the heady pre-crash days interest-only mortgages were handed out by many lenders without full checks that borrowers would eventually able to pay back the full mortgage amount.

The Financial Conduct Authority (FCA) estimates 55% of Wales' 103,000 interest only mortgage holders will have a shortfall of PS50,000 or more between what their current repayment plan will pay back and what the mortgage is worth.

This could mean homeowners reaching retirement age with a debt mountain hanging over their heads - forcing them to sell their property. The decision to raise the issue now is sensible as it is hoped repayment plans can now be put in place to deal with the problem - although this could mean big increases in mortgage payments for many.

Blame for this latest crisis does for some extent lie with mortgage lenders and advisors, with the FCA saying it was not clear how well some borrowers understood the discussions about how the mortgage was meant to be repaid when they took the deal out. It is hoped lessons have been learnt.

But homeowners must also take a share of responsibility. You don't need a degree in economics to know the money you borrow must at some point be repaid.
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Title Annotation:Letters
Publication:Daily Post (Conwy, Wales)
Article Type:Editorial
Date:May 3, 2013
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