Interest-only mortgage debt falling

Interest-only mortgage debt falling

The CML has reported a significant reduction in outstanding interest-only mortgage debt.

A year after the agreement between the CML and the FCA that lenders would contact borrowers with interest-only mortgages due to mature before 2020, a survey has found that there were an estimated 2.2million IOM outstanding on lenders’ books at the end of last year.

This is a fall of 12 per cent compared to 2012, meaning the number has fallen by around 300,000.

The CML also found that the loan-to-value profile of outstandinf interest-only mortgages has seen positive changes, with two-thirds of outstanding interest-only mortgages having LTV ratios of less than 75 per cent, with the majority of these not due to mature until after 2020.

CML director general Paul Smee said: "The regulator, mortgage lenders and the CML are collaborating very effectively so far to help interest-only borrowers manage their loans and avoid surprises when their loans mature. This work will continue, not just over the next year but over the long term."

But challenger bank Aldermore believes interest-only borrowers are still trapped by a lack of mortgage products.

Charles Haresnape, managing director of residential mortgages at Aldermore, said: “It is good news that customers are taking appropriate actions to manage their interest-only mortgages, but it remains problematic for borrowers who are suited to interest-only new deals to find lenders willing to lend on that basis.

“The reality is, these products are well suited to certain groups of homeowners and potential homeowners, such as junior doctors for example, who may be on a low income now, but have a high projected income in the future. We need more lenders to enter the interest-only market, to ensure consumers are getting sufficient choice and are made aware of all the options, when looking to remortgage.”

The CML’s survey represents round 96 per cent of the market.

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