Number of interest-only mortgages fell 13% in 2018
The number of interest-only mortgages held by borrowers fell by 13.1 per cent in 2018 compared to the previous year, according to UK Finance.
The trade body noted that the total number of pure interest-only mortgages has now fallen by over half (54 per cent) in the past seven years, from 2.5 million in 2012 to 1.23 million in 2018.
Meanwhile, the number of interest-only mortgages due to mature in 2019 and 2020 fell significantly (41.9 per cent), falling from 217,000 to just 126,000.
The reduction follows an industry-wide commitment by mortgage lenders to contact all interest-only borrowers with loans scheduled to mature before the end of 2020, to make sure they are on track to repay their loans or work out an alternative solution.
For example, they could switch to a full repayment mortgage or pay back some or part of their loan in full ahead of schedule.
Part and part mortgages
There were 360,000 partial interest-only (part and part) homeowner mortgages outstanding at the end of 2018, 16.1 per cent fewer than in 2017 and down from 705,000 in 2012.
The number of interest-only loans at higher (over 75 per cent) loan-to-values fell by 13.8 per cent in 2018, and now make up just 13.4 per cent of the total, compared to 36 per cent in 2012.
The number of interest-only loans set to mature by 2020 shrank by 91,000 in 2018 to just 126,000 loans, a fall of 41.9 per cent compared to 2017.
Jackie Bennett, director of mortgages at UK Finance said: “The number of outstanding interest-only mortgages has more than halved in the past seven years, and it is particularly encouraging to see the continuing rapid contraction in the numbers that were set to end on or before 2020, the first anticipated peak in maturities.
“However, it is as important as ever that we keep up the momentum through to 2020 and beyond, to make sure all borrowers are aware of the need to repay and have viable means to do so.
“For the small minority whose repayment plans do not appear sufficient, it is also very positive news that most interest-only loans now have strong equity stakes. This greater equity means borrowers are likely to access more alternative repayment options should they need them.
“We would encourage interest-only customers to contact their lender as soon as possible, to discuss the potential solutions available to them.”