"With a third of the interest-only book not due to mature until the 2030s, it is crucial we continue our commitment to managing developments to deliver the same positive outcomes"
The same research in 2012 sized the interest-only loan book at 3.2 million outstanding mortgages, equivalent to a third of the total residential mortgage stock.
Since then, there has been four years of steady decline, at a rate of between 10 and 13% a year.
The CML's data shows that the new interest-only lending that still takes place 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.
The CML said it is "encouraging" that nearly half of last year’s decrease in the book came from loans not set to mature until at least 2028. This contrasts sharply with previous years, where the majority of the decrease in stock came from loans redeeming on maturity.
Additionally, the number of interest-only loans at higher LTV ratios has decreased, most significantly at the longer end of the maturity spectrum.
In its analysis, the CML said: "These improvements mean that the interest-only book is in a much healthier position now than in 2012. For example, were house prices to rise over the long term at a historically modest 2.5% a year, only 30,000 loans – or 2% of the current interest-only book – would mature with over 75% LTV. Three years ago that figure was over 100,000 loans.
"With five years worth of data showing steady improvement, you could make a decent case for now calling this success. But, with 1.9 million interest-only loans still remaining, we would rather say "so far, so good".
"And with a third of the interest-only book not due to mature until the 2030s, it is crucial we continue our commitment to managing developments to deliver the same positive outcomes, so we report the same sort of progress every year. We look forward to the findings of the FCA’s thematic review to help us deliver these outcomes."
