The Council of Mortgage Lenders (CML) has released it’s the key findings from its latest annual member survey of interest-only mortgages.

The CML states: ‘Our survey covers well over 90% of all residential mortgages outstanding. When we first started to collect this data in 2012, the regulatory concern was that interest-only loans may have less certainty of repayment at the end of term than repayment mortgages, and the size of the interest-only book meant that this could potentially be a large problem. The results from our survey in 2012 sized the interest-only loan book at 3.2m outstanding mortgages, equivalent to a third of the total residential mortgage stock.

‘The picture has changed dramatically since then, with material year-on-year decreases in the size and proportion of the market that is interest-only. At the end of December 2016, the interest-only stock had fallen to 1.9m loans, accounting for 21% of all home-owner mortgages. We have now seen four years of fairly steady decline, at a rate of between 10 and 13% a year.’

According to the CML, new interest-only lending still takes place, but is now very much constrained by the affordability framework established by the mortgage market review. Less than 2% of new house purchase loans are now taken out on an interest-only basis, compared to a peak of nearly 40% in 2007.