FCA praises interest-only mortgage commitments

The Financial Conduct Authority (FCA) completed a thematic review of interest-only mortgages last year.

As a result of the review, lenders made a commitment to the regulator to contact interest-only borrowers and find out their plans for repaying their loans.

Lenders have met that commitment, but only 30 per cent of customers have responded to date, according to the FCA.

FCA chief executive Martin Wheatley said he was pleased industry, regulator and consumers have addressed the problem collaboratively.

“This forward-looking and 'consumer at the heart' type of action is a prime example of a model demonstrating good conduct outcomes and putting customers first; it’s good to see real progress is being made,” Mr Wheatley said.

“Our advice for borrowers is unchanged: you must engage with your lender; this is a shared problem and you need to work together to resolve it,” he said.

The UK has seen a significant reduction in lenders’ interest-only back books, which dropped by 12 per cent between the fourth quarter of 2012 and the fourth quarter of 2013, compared with the same period a year earlier when the reduction was less than two per cent.