The number of interest-only loans plummeted to just 6% of all first-time buyer loans in December 2010.
During the same period in 2007, interest-only loans accounted for 30% of all first-time buyer loans, the latest figures from the Council of Mortgage Lenders show.
Several lenders have recently stop-ped allowing interest-only on high LTV loans after the Financial Services Authority revealed it wanted lenders to have more robust repayment vehicles in place for these types of loans.
The CML’s data also revealed loans for remortgages fell to a 13-year low in 2010.
Remortgages totalled 313,200, worth £39.3bn, in 2010. This figure is down 23% by volume and 24% by value from 2009.
There were 529,300 loans advanced for house purchase in 2010, worth £77.1bn, an increase of 3% by volume and 11% by value compared with 2009.
House purchase lending in 2010 accounted for 57% of all mortgage activity, a rise of nine percentage points from 2009, and loans for remortgage accounted for 29%, down seven percentage points from 2009.
Michael Coogan, director general of the CML, says: “Access to funding for lenders is expected to stay under pressure this year, but it will now be matched by lower consumer demand due to the economic backdrop and a range of uncertainties which will impact the timing of borrowing decisions.
“We conclude that this will lead to gross lending levels in 2011 staying flat compared to 2010, with downside risks.”