The Halving of Interest-Only Mortgages: An Overview of the FCA's Research Findings

Analysis from the Financial Conduct Authority (FCA) has found that the number of interest-only mortgages and part-interest-only mortgages has halved since 2015. This reduction is largely due to borrowers repaying their loans earlier than expected or switching to other products. Most borrowers are aware of the need to have a repayment plan in place when taking out such a mortgage, however research suggests many may be overly optimistic about their ability to repay the full amount at the end of the term; it is estimated that as many as 46% may not have sufficient funds. The FCA therefore encourages those with an interest-only mortgage and no repayment plan to speak to their lender as soon as possible to discuss their options. They are also engaging with industry and consumer groups to discuss the research findings and how lenders can better support those struggling to repay all capital owed. The Consumer Duty is now in effect, meaning firms should take steps to ensure they meet these higher expectations.