Britain’s new Financial Conduct Authority (FCA) is calling on lenders to contact clients with interest-only mortgages to ensure they have a plan for paying off those loans before they mature. The move represents a broader approach by the FCA to intervene early when potential problem areas are identified.

The FCA published new research into consumers’ ability to repay their interest-only mortgages on Thursday. It finds that many people should be in a good position to repay their mortgage when it is due, but that many borrowers, particularly those whose mortgage is due before 2020, need to take control of their repayment planning now.

The research found that, of the 600,000 borrowers who will see their mortgage mature by 2020, its modeling forecasts that just under half are likely to have a shortfall; and, about one third of these shortfalls are expected to be for amounts more than £50,000.

It also notes that about 90% of all interest only borrowers have a repayment strategy. Furthermore, these are typically individuals with relatively high incomes, assets, and levels of forecast equity in the property at the end of the term, “so many will have backup options even where their intended repayment strategy does not work out as they had hoped.”

Nevertheless, in order to prevent widespread problems, it’s calling on lenders to contact their interest-only borrowers to prompt them into checking their plan for repayment is on track, and to consider their options if plans aren’t on track.

The FCA says that “this type of pre-emptive work is indicative of the way the FCA will act in the future, endeavouring to spot potential problem areas and prevent them from developing into bigger issues. By acting now, together with the mortgage sector, the FCA is aiming to prevent interest only borrowers defaulting on their loans in the future.”

To help lenders understand how they should treat concerned borrowers, the FCA is also publishing proposed guidance on how to deal with these customers. It says it will be monitoring progress closely and providing further assistance to firms where needed.

“By acting now we are aiming to nip this problem in the bud,” said Martin Wheatley, chief executive of the FCA. “Mortgage lenders have volunteered to contact their most at-risk customers with a ‘wake-up call’ to highlight the report’s findings and what they need to do without delay. We welcome this move and also the sector’s commitment to helping its customers try and find a solution – but people must engage with them.”

“This is a landmark piece of work and it comes at a critical time: lenders, regulators, and borrowers need to ensure that they grasp the nettle now before it is too late,” he added.

The Financial Services Consumer Panel, a statutory body that advocates on behalf of consumers in Britain, welcomed the FCA’s action, saying it has long advocated early intervention and pre-emptive action in the face of emerging threats to protect consumers from harm.

“We welcome the FCA’s work since early intervention by the regulator helps to minimise consumer detriment and has been one of the panel’s consistent demands,” said Adam Phillips, chairman of the panel.