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Stock of Interest-Only Loans Down by One-Third Since 2012

There has been a dramatic decline in the number of interest-only loans that are outstanding, according to the Council of Mortgage Lenders (CML).

In its latest update on the stock of interest-only mortgages, the CML reports that the interest only book is considerably leaner and healthier than it was four years ago. Not only has the stock of interest-only mortgages fallen by nearly a third since then, (from 2.5m to 1.7m since 2012), but the remaining interest only loans are at lower loan-to-value ratios.

The numbers suggest that both house price inflation and borrower behaviour in paying down debt are contributing to the improvement. In 2012 there were nearly 900,000 interest-only loans with a loan-to-value ratio of over 75%, while today there are just over 300,000. The CML expects this positive trend to continue moving forward.

The CML reports: 'Lenders and borrowers are continuing to work together to minimise the risks that can arise from interest-only loans, compared to repayment mortgages. The tone of the interest-only conversation is much changed since 2012, when we started collecting this data. At that point the basic facts - a stock of some 3.2m interest-only loans, and little information on how these borrowers intended to repay at the end of the term - posed risks that, whilst hypothetical, had the potential to be significant.

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