Understanding of interest-only mortgages is being checked by Santander, after the deal has been completed.
Santander is conducting checks of customers who have an interest-only mortgage, to make sure that they understand the risks of such a product. The lender makes the calls randomly, to test their knowledge of the mortgage. Customers are questioned to see if they realise that they have a mortgage on an interest-only basis, and whether they know what this entails. Santander also wants to check that customers have a repayment strategy in place and that they have been given all the facts by their mortgage broker.
Some believe that interest-only products have high risks attached. According to the Citizens Advice Bureau, there were one million interest-only mortgages last year in the UK, without any clear repayment strategy in place.
However, according to the Council of Mortgage Lenders (CML), the risks attached to interest-only mortgages is reducing, as lenders are trying to persuade their customers who may be at risk, to change to an alternative mortgage.
In 2012, when the Council of Mortgage Lenders started to collate data, there was around 3.2 million interest-only mortgages. There are currently around 1.7 million interest-only mortgages in place.
The CML stated that the volume of interest-only mortgages had potential risks attached, but now that risk had been lowered. A spokesperson for Santander said that they conduct quarterly checks to make sure their customers understand the financial commitment they are making.
Mortgage advisers study on a CeMAP training course to ensure they have a sound understanding of all mortgage types.