It says it is part of a strategy to support its customers. The standard fee for customers who switch or extend on an interest only mortgage is £50, however, the bank is removing these charges entirely to encourage any customers who are worried about repaying their final balance to take action.
‘As a responsible lender, we want to work with our customers to ensure that they are managing their finances and understand their needs and requirements at various stages of their life,’ said James Hillon, head of mortgages at the Co-operative Bank.
‘We have started a regular communication programme with all of our interest only customers to review their financial situation and ensure they fully understand their responsibility to repay their loan,’ he added.
He pointed out that there are a number of ways customers can close the gap between their outstanding mortgage balance and the value of their current investment, but it is important that customers recognise that the sooner they take action the better.
Customers can convert the outstanding balance of their loan to a capital and repayment mortgage over a suitable term up to a maximum age of 75 years of age at the end of the term. There will be no charge for this and this option will ensure that the mortgage will be repaid at the end of the term.
Customers making additional repayments have the opportunity to reduce their mortgage balance more quickly than on a current interest only plan, reducing both the amount outstanding on their loan as well as the amount of interest they have to pay each month. Early repayment charges may apply with regard to over payments, which will be clearly stated in your specific mortgage terms and conditions.
And customers can choose to extend the term on their interest only mortgage, giving them more time to ensure their repayment vehicle has sufficient funds to repay the mortgage balance by the end of the new term. Customers could then review their existing investment or savings plan, start an additional investment or savings plan or progress alternative options.
According to industry figures, by 2007 33% of mortgages being taken out were interest only.
