Every interest-only mortgage starts with a promise. At application, the lender checks that the borrower has a credible way to repay the capital at the end of the term, as MCOB 11.6 requires. A box is ticked, the loan completes, and the repayment vehicle quietly disappears from view.
For the next 20 or 25 years, the lender has little sight of whether that plan is on track. The broker loses touch until the next remortgage. The borrower finds out too late.
Anyone who has worked in lending knows the conversations at maturity. The borrower who chose downsizing but never meant to move. The one counting on an inheritance that has not come. The many who assumed the debt would simply disappear. By the time the lender wants its money back, the options are few, and nobody checked the plan after day one.
This is not a shrinking problem. Pure interest-only is running off, but part-and-part is not. UK Finance figures show part-and-part balances rose 3% to £40bn in 2025, even as the value of pure interest-only loans fell 15%. As James Tatch, head of analytics at UK Finance, put it: “Although the overall stock of outstanding interest-only loans continues to decline, we have seen a small increase in lending on a part-and-part basis.” With the FCA now consulting on widening access to part interest-only lending, more borrowers will carry an IO element, and more of those plans will need watching.
Consumer Duty changes the question
The FCA has long expected lenders to keep engaging interest-only borrowers through the term, not just at the start. Consumer Duty raises the bar further. Firms now need to evidence good outcomes, and a repayment strategy that was credible in year one is not evidence of a good outcome in year fifteen.
That creates a practical problem. Term monitoring on an IO book usually relies on periodic contact campaigns, borrower self-declarations and a lot of chasing. It is costly, response rates are patchy, and the data is out of date the moment it is collected. Lenders want better MI on repayment vehicle progress, but they rarely own or see the vehicle itself.
What good looks like
The fix is visibility. A repayment vehicle should be transparent and tracked against the debt it is meant to clear for the whole term, not just at application. If a borrower plans to repay from an ISA, a pension or other investments, the progress of that plan should be visible to them and, with their consent, to their broker and lender.
The technology to do this already exists. Investment platform data means a vehicle's value can be checked against the capital due on a regular basis, rather than relying on a borrower to send a statement every few years. A regular, shareable statement gives borrower, broker and lender the same picture.
Visibility is not a guarantee. Investments can fall as well as rise, and a tracked plan can still fall short. The point is to find that out in year eight, when there are options, rather than in year twenty-five, when there are few.
What this means for lenders
For lenders, live data on repayment vehicles opens up a different approach to IO books:
Earlier warning. Shortfall risk shows up as a trend, not as a surprise at maturity.
- Better MI. Repayment vehicle progress becomes something you can report on, supporting term monitoring and Consumer Duty outcome evidence.
- Targeted engagement. Contact can focus on borrowers whose plans are drifting, rather than blanket campaigns across the whole book.
- A stronger case at application. A tracked vehicle is easier to assess, and easier to keep assessing, than a declared intention.
What this means for brokers
Retention is one of broking's biggest problems. A client completes, the relationship goes quiet, and years later they take a product transfer direct or start again on a comparison site.
Interest-only clients make this worse and more important at the same time. They are the borrowers most likely to need help before maturity, and the ones a broker is least likely to hear from.
A tracked repayment vehicle changes that. With the client's consent, the broker sees the same picture the client does: the vehicle's value against the capital due. That gives a genuine reason to stay in touch which is not a sales call.
That is real customer care. Not a birthday email or a rate alert, but helping a client own their home at the end of the term. If a plan drifts, the broker can raise it early and talk through the mortgage options, such as part-and-part or a change of term, while there is still time.
It also gives broker firms what Consumer Duty asks for: evidence of ongoing support and of acting to avoid foreseeable harm, rather than a file note from the day of application.
And when rate review comes round, the client comes back to the broker who has been there all along. Retention and good outcomes start to pull in the same direction.
Where the industry goes next
Some broker firms are already starting to work this way, tracking repayment vehicles for interest-only clients through the term rather than filing them away at completion. The next step is for lenders to build the same visibility into how they monitor their books.
Andrew Montlake, managing director of Coreco, said: "Interest-only clients deserve more than a conversation at application and another at maturity. Our advisers want to see a client's repayment plan through the term and help keep it on track. That is what good advice, and Consumer Duty, should look like."
Interest-only is not the problem. Losing sight of the plan is. With the tools available today, no borrower should find out at maturity that their plan did not work.
