Last week I quoted Martin Lewis, the “MoneySavingExpert”, who was talking on BBC Radio 5 Live on the renting vs. buying question. He said: “Renting is not a dirty word. People in this country think renting is throwing money away, but often if they can’t afford a repayment mortgage they get an interest-only mortgage. And they don’t consider that to be throwing money away!”

Now recent research from asset management data firm xit2, quoted in the London “Independent”, has shown that of 1.3 million interest-only mortgages set to mature by 2020, about one million do not have a repayment plan in place.

Mark Blackwell, MD of xit2, says: “If lenders fail to help these borrowers find a repayment vehicle, it will come back and give them a nasty bite around 2020 when the big batch of high-LTV interest-only loans granted in the mid-2000s mature.

“Eighty per cent of these borrowers have no repayment plan. Plenty of those will be families on tight monthly budgets, with low household earnings and little to no life savings. Many of these borrowers won’t be able to pay off their mortgage before it matures and will be stuck in arrears.”

But, it seems, only a few lenders are alerting borrowers to the looming financial calamity as their mortgage matures, being unable to remortgage and still owing a huge capital sum on a property that may even be worth less than they paid for it.

Advisers say those on interest-only mortgages should review their situation and, if necessary, take immediate action to lessen any financial hit. Philip Bray from investmentsense has seen a steady increase in the number of clients coming to him with a hefty interest-only mortgage hangover. He says: “First things first, consider moving to a capital repayment plan, and use other assets to repay the debt. You could downsize, and purchase a smaller property from the equity in their home – admittedly this isn’t an option open to all.”

If the borrower is near retirement – and the Financial Services Authority says many are – more drastic action may be necessary: “They could use the tax-free lump sum from their pension to repay, or pay down some of, the debt, accepting the fact that they will have a lower income in retirement.”

Want a copy of the whole article from the “Independent”? CLICK HERE

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