Today we released interest-only data for 2018 showing a 13 per cent decrease in the stock of outstanding interest-only mortgages to under 1.5 million loans. This continues the steady decline we have seen each year since we started to collect this data in 2012.

The FSA's 2013 research identified three distinct peaks of interest-only maturities, the first of these ends in 2020. Therefore, it's particularly good news that, in our most recent data, the number of loans set to mature on or before 2020 fell by 42 per cent to 126,000 loans.

Chart 1: residential interest-only mortgages outstanding by scheduled maturity date

Source: UK Finance

The rapid reduction in this cohort is partly a result of the loans coming to the end of term and borrowers redeeming on schedule, whether using their original repayment vehicle or otherwise. However, a material amount of the total comes from redemptions ahead of schedule, and this is in large part a result of the industry's commitment to contact all interest-only customers to ensure they are aware of the need to repay - and have the viable means to do so.

Helped by these contact programmes and borrower actions to mitigate their repayment risk, this cohort is not only far smaller than the maturity schedule alone would dictate, but the loans remaining are in a strong position, even in a small minority of cases where the borrower is unable to make the final repayment from their original vehicle. Nearly eight in ten of these pre-2020 maturities now have an equity stake of over 50 per cent, and almost none have less than 25 per cent equity. These very comfortable equity stakes give borrowers a much wider range of alternative options to repay, should they need to consider them.

This first wave of maturities has less than two years to run and contact programmes are ongoing. However, with the substantial progress made to date, lenders have now been able to shift more resource into contact programmes for longer maturities.

A new dimension to contact strategies

When we published figures last year, we looked at the challenge of making successful contact with these borrowers. As we approach the deadline for this phase of the contact programme, establishing contact with any customers who have yet to engage becomes ever more elusive, and so we need to adapt strategies accordingly.

Given the more receptive customers had already been successfully contacted, engagement was more difficult last year, but lenders made good incremental progress. Additionally, the industry has built on the learning points from previous years to make real improvements in contacting those borrowers with longer maturities. Lenders are increasingly able to segment their back book so that they can more effectively respond to each borrower's profile and, from there, look to engage different customer types on a much more bespoke basis. With these more targeted strategies, almost two thirds of contacts last year resulted in borrower engagement for maturities between 2021 and 2028, and better than one in three for maturities beyond 2028.

Going forwards, lenders? contact strategies will continue to evolve, learning from industry best practice and what works best, to ensure all interest-only borrowers through the next two decades of maturities are well placed to repay.