Number of interest-only mortgages almost halved since 2012, say lenders
The number of interest-only mortgages has nearly halved in the past six years, figures from a trade association representing lenders show.
UK Finance said there are 1.7 million outstanding interest-only mortgages - down 46% since 2012, when there were 3.2 million loans.
It said that back in 2012, one million interest-only loans were due to mature by 2020 - but now only around 200,000 of these loans remain.
Interest-only mortgages allow people to pay only the interest on their loan off each month rather than the capital - the original amount borrowed.
Fears have been raised in recent years that households could be sitting on an interest-only time bomb - with some having no plans in place for how to pay off the capital at the end of the deal. This could ultimately leave them at risk of losing their home.
Following concerns raised by the regulator, mortgage lenders have been contacting borrowers to make sure they have realistic plans in place to clear their debts. Some may have switched to a repayment mortgage.
Regulator the Financial Conduct Authority (FCA) suggested earlier this month that more help could be given to "mortgage prisoners" - longstanding mortgage customers who are trapped in their existing deal. Many of these people took out interest-only deals before the financial crisis.
The FCA will consult on proposed remedies, with a final report around the end of the year.
UK Finance said the total value of the interest-only mortgage book is £250 billion, down 37% since 2012.
The total includes both pure interest-only mortgages and ones which are partially interest-only.
Within the total, there were 1,293,000 pure interest-only home owner mortgages outstanding at the end of 2017, and 429,000 partial interest-only home owner mortgages.
The number of interest-only loans at higher loan-to-values of over 75% has also fallen.
Loans at these higher loan-to-value ratios (LTVs) now make up 13% of the total, compared with more than a third (36%) in 2012.
UK Finance said that while making contact with borrowers who are more reluctant to engage remains a challenge, there is also evidence that lenders are seeing greater success here, and the vast majority of borrowers who do engage have repayment plans in place.
Jackie Bennett, director of mortgages at UK Finance, said: "The number of outstanding interest-only loans has halved in the past six years, with a particularly steep decline in higher loan-to-value mortgages.
"Many borrowers continue to redeem ahead of schedule or switch to a repayment mortgage.
"However, there remains plenty more work to do over the coming years to ensure that those remaining borrowers who have so far been reluctant to engage have viable repayment plans in place.
"We continue to encourage all borrowers with interest-only mortgages to contact their lender as soon as possible, as the sooner they do so the more options will be available.
"UK Finance will also be developing new best practice for lenders in this area, to reflect the changing regulatory landscape and help the industry engage successfully with more borrowers."