On 15 August 2023, the FCA published a research note on interest only mortgages, which provides an analysis of FCA mortgage data.

The research note sets out an analysis of the FCA’s data on the population of regulated interest-only mortgages that existed on 31 December 2022. It is a factual analysis, based on the mortgage data that firms are required to report to the FCA in the regulatory return Product Sales Data: Mortgage Performance Data (PSD007). The aim of the analysis is to help the FCA understand the characteristics of current interest-only mortgages.

The research note highlights the following:

  • There are now fewer than 1 million regulated mortgages outstanding in the UK that are wholly or partly interest-only. The number has dropped rapidly in recent years, halving since 2015 when there were more than 2 million such mortgages.
  • Only a small proportion of interest-only and part-and-part mortgages are past their maturity date i.e. the mortgage has not been repaid at the end of the stated mortgage term. As of H2 2022 there were around 22,000 such mortgages, which is 2.2% of the total number of interest-only and part-and-part mortgages.
  • Regions in the south and east of England have a disproportionately large share of the UK’s interest-only mortgage stock. London accounts for 21%, followed by the South-West with 13%, the South-East with 12%, and the Eastern region with 10%.
  • Interest-only mortgages taken out between 2005 and 2008, when lending criteria were more relaxed than now, have the highest current loan-to-values (LTVs), compared to interest-only mortgages taken out in later years. For example, those sold in 2007 have a current median estimated LTV of 49%, compared to 26% for those sold shortly afterwards in 2012.
  • The current median estimated LTV of interest-only mortgages varies significantly by region. Northern Ireland has the highest median LTV at 63%, and the Eastern and South-East regions the lowest at 33%.

The FCA will now be engaging with industry and consumer groups to discuss the research findings and how lenders can further support borrowers who may not be able to repay all the capital owed at the end of their mortgage.

Furthermore, with the Consumer Duty now in effect, the FCA will review its existing guidance on the fair treatment of interest-only borrowers to ensure it is in line with the higher standards set by the Duty. Firms should now be considering how they support their borrowers and meet expectations set out by the Duty.