On 21 February 2024, the Financial Conduct Authority (FCA) published a webpage outlining its working group on interest-only (IO) mortgages.

The FCA is working with 12 mortgage lenders and administrators to continue its work in the interest-only mortgage market. The group’s primary purpose is to support and inform the FCA’s review of its existing IO guidance as it committed to when it published its consumer research and market data analysis.

The number of IO and part-and-part mortgages, as at the end of 2022, has reduced more quickly than anticipated and the FCA notes that this indicates those borrowers had better than expected repayment strategies or have been able to move onto a repayment mortgage. Despite this, however, it warns that the challenge remains for a significant number of borrowers, and any IO borrowers who are unsure if their current plan is sufficient should speak to their lender as soon as possible to discuss their options.

The FCA also flags that, on 8 February 2024, members held a meeting where the Terms of Reference were agreed. Noting the FCA research from 2013 and 2022, the group discussed the changing market, the rate and handling of current maturities, and possible future challenges. The group was asked at what point they would first make contact with the borrower about their repayment strategy and participants outlined different strategies and engagement rates. The group agreed that successful, early engagement allowed for borrowers to consider a wider range of repayment options.

The group will begin its review of the FCA’s guidance in subsequent meetings. It will also take a deeper look into engagement strategies, as well as the other ways borrowers who cannot repay their mortgage at maturity can be supported.