Number of interest-only mortgages halved: UK Finance

The number of interest-only mortgages has almost halved in the past six years, according to the latest figures from UK Finance.

There are currently 1.7m outstanding interest-only mortgages. This is down 46 per cent since 2012, when this data was first collected.

The total value of these mortgages is £250bn, down 37 per cent over the same period.

At the end of last year there were 1,293,000 pure interest-only mortgage outstanding, a 14.9 per cent fall over the year.

In addition there were 429,000 partial interest-only mortgages. This figure increased by 2.1 per cent over the 2017. 

This UK Finance data shows there was a particularly sharp fall in the number of higher-value interest-only mortgages. The number of interest-only mortgage worth more than 75 per cent LTV fell by 13.9 per cent in 2017, when compared to the previous year.

These loans now make up just 13 per cent of the total number of outstanding interest-only mortgages. This compares to 36 per cent in 2012.

This data only relates to residential mortgages, and excludes lifetime and retirement interest-only plans which have no scheduled maturity date.

Separate analysis by UK Finance shows that at the end of 2012 there were one million interest-only loans due to mature by 2020. At the end of 2017 only 200,000 of these loans remained.

UK Finance says this showed lenders were seeing “greater success” in contacting these borrowers, and encouraging them to switch to repayment, or partial repayment plans.

Sales of interest-only mortgages were significantly curtailed following the financial crisis. Tighter regulation meant lenders could no longer offer these mortgages without a credible repayment plan. A future inheritance, or sale of the property were no longer deemed viable repayment options.

At the same time lenders have been contacting customers with outstanding interest-only mortgages to discuss options.

UK Finance’s head of mortgage Jackie Bennett says: “Many borrowers continue to redeem [their interest-only mortgages] ahead of schedule, or switch to a repayment mortgage.

“However there remains plenty more work to do over the coming years to ensure that those remaining borrowers who have so far been reluctant to engage, have viable repayment plans in place.”

She adds: “UK Finance will also be developing new best practice for lenders in this area, to reflect the changing regulatory landscape and help the industry engage successfully with more borrowers.”





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