Regulator to investigate interest-only mortgage market

Regulator to investigate interest-only mortgage market

The interest-only mortgage market is to come under the spotlight once again as the regulator investigates whether lenders are acting in the best interests of consumers.

The Financial Conduct Authority (FCA) has today outlined which areas of the market it plans to focus on in the 2017/18 business year.

It will turn its attention to the interest-only mortgage market as many of these loans are due to mature in the next few years. During the term of interest-only mortgage loans, borrowers only repay the interest and then use savings, investments or other assets – known as ‘repayment vehicles’ - to pay off the mortgage at the end of the term.


However, there is a long-running concern in the mortgage industry that many people will be unable to pay back their interest-only loans and that lenders need to offer more support to these customers.

The FCA says many of these loans will begin to expire in 2020.

The regulator says: “Around 1.8 million UK home owners currently have outstanding interest-only mortgages (excluding buy-to-let), and many do not have an appropriate strategy to repay them.

“We will look at how firms treat borrowers whose interest-only mortgages are approaching maturity and their ability to ensure these customers are treated fairly.

“This will include those interest-only mortgages that are due to be repaid by 2020 – where borrowers have the least amount of time to find a solution.”

Once a popular product, interest-only mortgages have all-but-disappeared from the residential market in recent years. This has left many people with interest-only mortgages unable to switch to a new deal.

Smaller lenders, such as Shawbrook Bank, have launched mortgage products targeting these borrowers but mainstream support is still lacking.

Your Comments

I have an interest only mortgage and am extremely grateful for it. I never considered this a 'home forever' - I will have to sell 'my' flat when the mortgage expires. But this is so much better than renting. It has meant I can lead a reasonable life rather than paying extortionate rent, and when I do sell I will have a decent amount of cash left over - possibly, as my flat is in London, even enough to buy a small flat outside of London outright, in which to 'enjoy' my 'retirement' such as it will be. All mortgages should be repayment only? I couldn't disagree more. Having an interest-only mortgage has given my mid-life a chance to breathe. If the only option available had been a repayment mortgage I dread to think what my life would be now. Either paying rent or paying a repayment mortgage - both more than I can earn. If renting, paying more than I can earn AND living in a shared flat, most probably. In serious debt at the best. Dead at worst. (Or vice versa.)

Hi Jess, thank you for sharing your story. I would be very interested to hear more about your plans. Please can you email Best wishes, Moira O'Neill, editor, Moneywise

I am at the other end of the scale to Jess as my parents had an interest only mortgage unbeknown to me until they told me in December 15 that they had to pay £75,000 by July 2016 or they would loose the house.  I have had to take a second mortgage to sort this out for them and although yes the house will eventually be mine I can not really afford this aditional 2nd mortgage.

My interest only mortgage expires January 2018.  I've been overpaying to try to reduce the balance, but the pathetic endowment (which I still believe was mis-sold) that was supposed to not only pay off the mortgage, but also generate a smally nest egg on top, will barely pay off half of it.

Hi Terri and shz1400, thank you for sharing your stories. We would like to see if we can help. Email