Nearly one million homeowners with interest-only mortgages are a “ticking timebomb” because they have made no plans for paying off their debt.

The shock figures suggest that almost one in three who have taken out these loans could see their home repossessed at the end of the term.

Millions of interest-only mortgages were taken out in the 1980s and 1990s, often backed by underperforming endowment plans.

Now a new study by Citizens Advice claims that 3.3million homeowners have an interest-only mortgage, some 500,000 more than previously estimated by the Financial Conduct Authority.

Of these, 934,000 have made no arrangements to pay it off when their term ends, and half have not even considered how to repay the capital.

Many will find it harder to extend their mortgage term following the Mortgage Market Review, which has forced lenders to tighten criteria.

Citizens Advice said some homeowners claimed that they had been mis-sold their loan and were not even aware they had to repay the full capital at the end of their term.

Others bought an endowment policy that will leave them with a major shortfall at maturity.

Gillian Guy of Citizens Advice, said interest-only mortgages have forced many into a financial black hole.

“Borrowers who took out interest-only mortgages years ago and don’t have a plan to repay face a ticking timebomb.

“The choice between selling their property, quickly finding the money to pay off their debt or risk of repossession is a distressing prospect.”

Citizens Advice also warned that interest-only mortgage holders do not have the same protection at the end of their term as those with other home loans who fall into arrears.

Three years ago, lenders were told they had to consider alternative options before repossessing homes, including extending the length of a mortgage, changing the type of mortgage and giving people reasonable time to sell their property if necessary.

But these protections do not apply to interest-only mortgage holders at the end of the term.

Guy said: ‘It’s time to level the playing field so that interest-only customers get the same protections when their mortgages mature.’

Around 85,000 interest-only mortgages are expiring every year and the crisis is expected to continue until 2032.

Simon Chalk, equity release expert at Age Partnership, said: “The interest-only time-bomb has been made all the more devastating by the affordability criteria introduced by lenders as a consequence of the Mortgage Market Review.

“The unintentional side-effect of MMR is that it has created a league of interest-only mortgage prisoners unable to remortgage to repay their debt.”

Chalk said the situation was urgent. “Borrowers with interest-only deals should not be forced to abandon their life-long homes.