FCA and Industry Working Group on interest-only mortgages

We are working with 12 mortgage lenders and administrators to continue our work in the interest-only (IO) mortgage market.

The group’s primary purpose will be to support and inform the FCA’s review of its existing IO guidance (FG13/7) as it committed to when it published the consumer research and market data analysis

The number of IO and part-and-part mortgages, as at the end of 2022, has reduced to just under 1 million compared to 2 million in 2015. This number has reduced more quickly than anticipated and indicates those borrowers had better than expected repayment strategies or have been able to move onto a repayment mortgage. 

Whilst the number of interest-only mortgages has reduced faster than expected, the challenge remains for a significant number of borrowers. Any interest-only borrowers who are unsure if their current plan is sufficient, should speak to their lender as soon as possible, to discuss their options.

20 March 2024 meeting

The minutes from the meeting on the 8 February were agreed.

The group considered the governance and management information sections of the guidance (FG13/7). The group discussed the usefulness of these sections in helping firms set their strategies, ensuring the right data is captured to understand borrowers' circumstances and provide the right level of support. The group also considered how the standards set by the Consumer Duty aligned with the guidance.  

The Group commented on the principle of including good and poor practice examples in the guidance. Firms said these could be useful to contextualise the guidance, to re-affirm expectations, and assist second (and third) line assurance.

The next meeting will be used to work through the customer communication and staff training and competence (documented guidance framework) sections. Between meetings working group members are contributing to a line-by-line review of the guidance.

8 Feb 2024 meeting

Members agreed the Terms of Reference, this has now been published.

Noting the FCA research from 2013 and 2022, the group discussed the changing market, the rate and handling of current maturities, and possible future challenges.

The group was asked at what point would they first make contact with the borrower about their repayment strategy. Participants outlined different strategies and engagement rates. The group agreed that successful, early engagement allowed for borrowers to consider a wider range of repayment options.

The group will begin its review of the FCA’s guidance in subsequent meetings. They will also take a deeper look into engagement strategies, as well as the other ways borrowers who cannot repay their mortgage at maturity can be supported. 

Page updates

: Information added 20 March 2024 meeting