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

  • There are currently 1.7 million outstanding interest-only mortgages (including partial interest-only), down 46 per cent since 2012, when this data was first collected. The total value of the interest-only mortgage book is £250 billion, down 37 per cent in the same period.
  • There were 1,293,000 pure interest-only homeowner mortgages outstanding at the end of 2017, a 14.9 per cent fall over the last year.
  • There were 429,000 partial interest-only homeowner mortgages outstanding at the end of 2017, a 2.1 per cent rise over the last year.
  • The number of interest-only loans at higher (over 75 per cent) loan-to-values fell by 13.9 per cent in 2017. Loans at these higher loan-to-value ratios (LTVs) now make up 13 per cent of the total, compared to 16 per cent in 2016 and 36 per cent in 2012.
  • Separate analysis by UK Finance reveals that of the one million interest-only loans due to mature by 2020 that were live at the end of 2012, only around 200,000 now remain. Whilst making contact with borrowers who are more reluctant to engage remains a challenge, there is also evidence that lenders are seeing greater success here, and the vast majority of borrowers who do engage have repayment plans in place.
  • UK Finance has also published a Frequently Asked Questions document today on interest-only mortgages.

Commenting on the data, Jackie Bennett, Director of Mortgages at UK Finance, said:

“The number of outstanding interest-only loans has halved in the past six years, with a particularly steep decline in higher loan-to-value mortgages.

“Many borrowers continue to redeem 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.

“We continue to encourage all borrowers with interest-only mortgages to contact their lender as soon as possible, as the sooner they do so the more options will be available.

“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.”

Notes to Editor  

  1. UK Finance is a trade association formed on 1 July 2017 to represent the finance and banking industry operating in the UK. It represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation brings together most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association
  2. The data shown are for first charge homeowner mortgages only. Figures are reported by most UK Finance mortgage members and presented here on a grossed-up basis from that sample to reflect total market size.
  3. Figures exclude lifetime mortgages, and retirement interest-only mortgages, both of which have no scheduled maturity date.
  4. UK Finance has published analysis today of the progress made so far in reducing the number of interest-only mortgages and the challenges that remain for the industry, including the need to engage with reluctant borrowers.
  5. UK Finance’s interest-only toolkit, a framework which lenders can use to develop their strategies to engage with interest-only customers, is currently being reviewed and updated to reflect the changing regulatory landscape.
Number of interest-only mortgages halves in six years
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