Latest news with #interestOnlyMortgages
The Guardian
24-06-2025
- Business
- The Guardian
Interest-only mortgage could make comeback as regulator revisits rules
They were once called a 'ticking timebomb' but interest-only mortgages could become easier to get hold of as the Financial Conduct Authority (FCA) looks at ways to support home ownership. Interest-only mortgages were hugely popular but almost became extinct following the 2007-08 financial crisis, with some viewing them as one of the worst examples of irresponsible lending. But in a discussion paper on the future of the mortgage market, the FCA said it would like to hear views on 'whether our rules could better support more interest‑only mortgages'. It added: 'Interest‑only mortgages could be suitable for consumers who may struggle to afford a repayment mortgage and can support sustainable home ownership.' Its seemingly supportive words may suggest that, like 100% mortgages, which also largely disappeared after the financial crisis and are starting to pop up again, these contentious deals could be heading for a comeback. With a fully interest‑only mortgage, the borrower only pays the interest on their home loan, 'substantially reducing the contractual monthly payment and potentially making the mortgage more affordable', said the regulator. There are also so-called 'part and part' mortgages where a chunk of the loan is interest-only and the rest is on a repayment basis. One big problem with pre-financial crisis interest-only loans was that many were taken out without proof borrowers could pay off their debt. In 2009 the FCA's predecessor regulator officially labelled them as 'high-risk' and, in 2012, it called them a 'ticking timebomb'. The FCA now expects lenders to ensure there is a 'credible repayment strategy' for paying back the capital at the end of the mortgage term. Interest-only home loans are available – they made up 4.5% of regulated mortgage sales in 2024, compared with 39% in 2007 – though they are mainly used by buy-to-let landlords. They are also available as a niche product aimed at people in certain generally higher-earning professions such as barristers, accountants, investment bankers and vets. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Despite their tainted image, many experts have maintained that these loans remain right for certain people and, only this week, a lender called Gen H announced the staged launch of a new interest-only offering. It said this type of deal 'can spell the difference between staying locked in the rental cycle or accessing home ownership and building meaningful wealth over time'. In its discussion paper, the FCA said: 'Interest‑only mortgages can be a flexible way for consumers to engage with the property market … We could, for example, explore circumstances in which borrowers could more easily shift between repayment and interest‑only during the mortgage term without having to set up a repayment vehicle.'
Yahoo
17-06-2025
- Business
- Yahoo
The number of homeowners using interest-only mortgages
The number of homeowners with interest-only mortgages has decreased as borrowers repay their loans on time or ahead of schedule, according to a banking and finance industry trade association. At the end of 2024, there were 541,000 "pure" interest-only homeowner mortgages outstanding, a decrease of 18.5 per cent compared to 2023. Additionally, there were 174,000 partial interest-only homeowner mortgages outstanding at the end of 2024, a 13.0 per cent decrease compared to the previous year. With interest-only mortgages, borrowers only pay the interest on their debt, rather than paying down the capital. This reduces monthly repayments but requires the initial loan amount to be repaid eventually, typically through savings or investments. The Financial Conduct Authority (FCA) has previously encouraged interest-only mortgage holders without a sufficient repayment plan to contact their lender to discuss their options. Research for the FCA published in 2023 indicated 82 per cent of borrowers were confident they could repay what remained on their loan at the end of the mortgage term, but the regulator was concerned some people may be 'overly optimistic'. UK Finance said the total interest-only mortgage stock (including partial interest-only deals) has reduced by 78 per cent in number and 61 per cent in value since 2012, when figures were first collected. Charles Roe, director of mortgages at UK Finance, said: 'In 2024, customers with interest-only mortgages continued to pay on or ahead of schedule, with 150,000 fewer mortgages on interest-only terms at the end of the year than at the start. 'Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and ability to repay, with tailored help available for those who do not. 'The interest-only book has shrunk in size each year since the end of the financial crisis and is now around one fifth of the number seen in 2012, when these data were first collected. 'It is particularly encouraging that the numbers of interest-only loans at higher loan-to-value ratios has fallen sharply – around twice the overall contraction – with a similar movement in those loans set to mature over the next two years. 'Those customers whose loans are theoretically most at risk continue to redeem ahead of time, reducing the risk profile of the remaining interest-only book. 'The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently indicate the vast majority of these do in fact repay in full over the first few months following the end of term. 'As always, any customers worried about repaying their mortgage should contact their lenders early, who stand ready to help with a range of options to repay.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
17-06-2025
- Business
- Yahoo
Shrinking number of homeowners sitting on interest-only mortgages, figures show
The number of homeowners sitting on interest-only mortgages has shrunk as borrowers have paid the money back on or ahead of schedule, according to a banking and finance industry trade association. Some 541,000 'pure' interest-only homeowner mortgages were outstanding at the end of 2024, 18.5% fewer than in 2023. There were also 174,000 partial interest-only (a combination of interest-only and repayment) homeowner mortgages outstanding at the end of 2024, 13.0% fewer than in 2023. With interest-only mortgages, borrowers pay only the interest on their debt, rather than paying down the capital as well. This lowers the monthly cost of repayments, but means the initial amount borrowed still needs to be paid off. Borrowers taking out interest-only mortgages are expected to have a plan to enable them to eventually repay the loan, such as using savings or investments. Interest-only mortgage holders without a sufficient repayment plan have previously been encouraged by the Financial Conduct Authority (FCA) to speak to their lender to discuss their options. Research for the FCA published in 2023 indicated 82% of borrowers were confident they could repay what remained on their loan at the end of the mortgage term, but the regulator was concerned some people may be 'overly optimistic'. UK Finance said the total interest-only mortgage stock (including partial interest-only deals) has reduced by 78% in number and 61% in value since 2012, when figures were first collected. Charles Roe, director of mortgages at UK Finance, said: 'In 2024, customers with interest-only mortgages continued to pay on or ahead of schedule, with 150,000 fewer mortgages on interest-only terms at the end of the year than at the start. 'Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and ability to repay, with tailored help available for those who do not. 'The interest-only book has shrunk in size each year since the end of the financial crisis and is now around one fifth of the number seen in 2012, when these data were first collected. 'It is particularly encouraging that the numbers of interest-only loans at higher loan-to-value ratios has fallen sharply – around twice the overall contraction – with a similar movement in those loans set to mature over the next two years. 'Those customers whose loans are theoretically most at risk continue to redeem ahead of time, reducing the risk profile of the remaining interest-only book. 'The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently indicate the vast majority of these do in fact repay in full over the first few months following the end of term. 'As always, any customers worried about repaying their mortgage should contact their lenders early, who stand ready to help with a range of options to repay.'
The Independent
17-06-2025
- Business
- The Independent
The number of homeowners using interest-only mortgages
The number of homeowners with interest-only mortgages has decreased as borrowers repay their loans on time or ahead of schedule, according to a banking and finance industry trade association. At the end of 2024, there were 541,000 "pure" interest-only homeowner mortgages outstanding, a decrease of 18.5 per cent compared to 2023. Additionally, there were 174,000 partial interest-only homeowner mortgages outstanding at the end of 2024, a 13.0 per cent decrease compared to the previous year. With interest-only mortgages, borrowers only pay the interest on their debt, rather than paying down the capital. This reduces monthly repayments but requires the initial loan amount to be repaid eventually, typically through savings or investments. The Financial Conduct Authority (FCA) has previously encouraged interest-only mortgage holders without a sufficient repayment plan to contact their lender to discuss their options. Research for the FCA published in 2023 indicated 82 per cent of borrowers were confident they could repay what remained on their loan at the end of the mortgage term, but the regulator was concerned some people may be 'overly optimistic'. UK Finance said the total interest-only mortgage stock (including partial interest-only deals) has reduced by 78 per cent in number and 61 per cent in value since 2012, when figures were first collected. Charles Roe, director of mortgages at UK Finance, said: 'In 2024, customers with interest-only mortgages continued to pay on or ahead of schedule, with 150,000 fewer mortgages on interest-only terms at the end of the year than at the start. 'Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and ability to repay, with tailored help available for those who do not. 'The interest-only book has shrunk in size each year since the end of the financial crisis and is now around one fifth of the number seen in 2012, when these data were first collected. 'It is particularly encouraging that the numbers of interest-only loans at higher loan-to-value ratios has fallen sharply – around twice the overall contraction – with a similar movement in those loans set to mature over the next two years. 'Those customers whose loans are theoretically most at risk continue to redeem ahead of time, reducing the risk profile of the remaining interest-only book. 'The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently indicate the vast majority of these do in fact repay in full over the first few months following the end of term. 'As always, any customers worried about repaying their mortgage should contact their lenders early, who stand ready to help with a range of options to repay.'
The Independent
17-06-2025
- Business
- The Independent
Shrinking number of homeowners sitting on interest-only mortgages, figures show
The number of homeowners sitting on interest-only mortgages has shrunk as borrowers have paid the money back on or ahead of schedule, according to a banking and finance industry trade association. Some 541,000 'pure' interest-only homeowner mortgages were outstanding at the end of 2024, 18.5% fewer than in 2023. There were also 174,000 partial interest-only (a combination of interest-only and repayment) homeowner mortgages outstanding at the end of 2024, 13.0% fewer than in 2023. With interest-only mortgages, borrowers pay only the interest on their debt, rather than paying down the capital as well. This lowers the monthly cost of repayments, but means the initial amount borrowed still needs to be paid off. Borrowers taking out interest-only mortgages are expected to have a plan to enable them to eventually repay the loan, such as using savings or investments. Interest-only mortgage holders without a sufficient repayment plan have previously been encouraged by the Financial Conduct Authority (FCA) to speak to their lender to discuss their options. Research for the FCA published in 2023 indicated 82% of borrowers were confident they could repay what remained on their loan at the end of the mortgage term, but the regulator was concerned some people may be 'overly optimistic'. UK Finance said the total interest-only mortgage stock (including partial interest-only deals) has reduced by 78% in number and 61% in value since 2012, when figures were first collected. Charles Roe, director of mortgages at UK Finance, said: 'In 2024, customers with interest-only mortgages continued to pay on or ahead of schedule, with 150,000 fewer mortgages on interest-only terms at the end of the year than at the start. 'Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and ability to repay, with tailored help available for those who do not. 'The interest-only book has shrunk in size each year since the end of the financial crisis and is now around one fifth of the number seen in 2012, when these data were first collected. 'It is particularly encouraging that the numbers of interest-only loans at higher loan-to-value ratios has fallen sharply – around twice the overall contraction – with a similar movement in those loans set to mature over the next two years. 'Those customers whose loans are theoretically most at risk continue to redeem ahead of time, reducing the risk profile of the remaining interest-only book. 'The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently indicate the vast majority of these do in fact repay in full over the first few months following the end of term. 'As always, any customers worried about repaying their mortgage should contact their lenders early, who stand ready to help with a range of options to repay.'
