The number of interest-only mortgages has halved in the past six years, according to new figures from UK Finance. This comes as no surprise – following the extravagant lending policies of the early 2000s, there was a backlash against interest only following the credit crunch.
As lenders pulled out of the market, this sentiment was reinforced by the Mortgage Market Review in 2014. The Financial Conduct Authority provided guidance on responsible lending, one major aspect of which was the need to have a viable repayment strategy in place for interest-only loans.
These factors have driven down volumes of interest-only lending. It still has a place in the market but is rightly restricted to those who are genuinely in a position to repay the capital from credible sources, such as high earners who receive a lot of their income via regular, guaranteed bonuses.
Borrowers who have an interest-only mortgage and are concerned as to how they are going to pay it back should speak to their lender or a mortgage broker, rather than burying their heads in the sand. There are options available and the sooner you address the issue, the better.