Risk Of Interest Only Mortgages Falls

The Council for Mortgage Lenders (CML) says that the risk of interest-only mortgage loans is falling. This is even though 300,000 of them have not been paid in full, at the end of their term, since 2011. The CML says that its members’ data shows that defaults on interest-only loans has fallen by at least 10% every year since 2012.

Mortgage Strategy reports

“The trade body says that fewer than 2 per cent of new house purchase loans are interest-only , compared to a peak of nearly 40 per cent in 2007… The CML also says it is positive that nearly half of the 2016 drop in outstanding interest-only loans came from mortgages not maturing until at least 2028… By contrast, much of the 2012-2015 drop in the lending class came from loans redeeming on maturity… The CML also noted that the number of interest-only loans at higher loan-to-value ratios fell in 2016… The CML says lenders have reported around 300,000 loans that did not redeem fully on their maturity date since 2011… The trade body also says there are a “small, but material, number of higher risk loans”… There are 11,000 loans at more than 75 per cent LTV with two years or fewer to run… This category is also reducing in size, but at a slower pace for higher LTV loans.”