Borrowers with an interest-only mortgage must formulate a repayment plan, one expert has warned.
Repayment plans towards interest-only mortgages could include a monthly direct debit or standing order into a repayment vehicle - such as a personal equity plans or individual savings accounts - without these, borrowers could be facing a "dangerous" situation, claimed Ray Boulger, senior technical manager at John Charcol.
The expert commented in the wake of a report into interest-only mortgages conducted by the Financial Services Authority, which recognises that a solid repayment plan could be vital for these borrowers.
"It is very easy to persuade oneself that putting off repaying a mortgage is OK when there are always so many other demands on one's money," he remarked.
"Thus it is important to be realistic about the mortgage repayment plan, both in respect of the method and the timing."
The Financial Services Authority's report found that ten per cent of borrowers with interest-only mortgages had only "a rough idea" of how they were going to pay back the loan .
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