The FCA has flagged up low protection insurance levels, interest-only mortgages and high outstanding balances as potentially harmful to consumers.
The regulator says this in its Financial Lives survey findings, published today. However, the FCA says risk levels completely depend on consumer age brackets.
For those aged 35-44, the FCA says the “significant” lack of protection cover is a “potential harm” for those with mortgages and/or children.
It adds: “Given the financial commitments that this group face, any long‑term loss of income could have potentially devastating effects on family life.”
The regulator says that high levels of interest-only mortgages are a potential harm to those aged 45-54.
Fifteen per cent of this age group have an interest-only mortgage, 40 per cent of all that have such a loan.
The FCA suggests that there is a problem with many not having plans to pay off the balance owed.
One quarter of 45‑54 year olds holding a part or fully interest‑only mortgage say they are already paying off some of the capital.
The regulator notes lenders are contacting these customers to help, but that this might be of limited use in practice.
The FCA says: “There is some evidence to suggest that those whose interest‑only mortgages are ending in the next five years are being contacted by their mortgage lender about how they will repay the capital outstanding, but survey sample sizes are small and further research may be required to validate this finding.”
The FCA also notes that the 35-44 group can be financially stretched, and can owe large amounts on mortgages.
It says half with a mortgage owe between £100,000 and £250,000, and one in ten owes more than £250,000.
The regulator adds that 13 per cent of 35-44 year-olds would struggle if their payments went up by up to £100 a month.
However, the FCA says mortgagors in this age group can bear such increases much better than renters.
The FCA interviewed 12,000 people for the survey.