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Hundreds of thousands of older borrowers facing a shortfall on their interest-only mortgages urgently need support to help them manage their debt.

The industry needs to offer them more than "extend and pretend solutions", according to the Equity Release Council (ERC).

More than 500,000 homeowners may have to sell their home to clear interest-only debt.

Yet despite recent tougher regulation, the number of interest-only mortgages is starting to rise again.

Leeds Building Society recently launched a range of interest-only mortgages.

Nigel Waterson, chairman of the ERC, said: "With more interest-only mortgages predicted to emerge over the next year, it's vital that solutions for existing borrowers in this category who lack a repayment plan don't create confusion or scrimp on the protections enjoyed by consumers who opt for equity release.

"There has been talk of banks extending the contracts of interest-only borrowers for the rest of their lifetime.

"This might allow them to put off settlement of the capital owed, for example, until they pass away and their house is sold.

"But it is very important not to assume this aligns with what regulators define as a lifetime mortgage'.

"The latter can include the option for consumers to pay interest but - crucially - does not oblige them to do so without the freedom to move to a roll-up product if needed."

Waterson said that equity release Statement of Principles mean that borrowers choosing a recognised lifetime mortgage can rely on the guaranteed right to tenure and protection against negative equity, among other safeguards.

"It would do interest-only consumers a disservice to be moved onto lifetime' products that fall short of offering the same protections."

Waterson says borrowers' housing wealth should be used to defuse the interest-only timebomb. "The challenge for industry is to support this without compromising on the standards of advice and protection that equity release borrowers enjoy, or creating confusion over the different options available.

"It is vital that regulators and lenders engage in discussions over these issues as more interest-only loans mature."

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