With the Financial Conduct Authority's consultation on widening interest-only access for first-time buyers open until 28 July 2026, new research from residential mortgage lender Gen H has found that interest only products are proportionally underrepresented in first-time buyer markets despite their suitability for overcoming affordability or monthly payment challenges.
The FCA's CP26/18, published 9 June 2026, proposes changes to its interest-only framework as part of a wider package of reforms aimed at helping first-time buyers and other underserved borrowers get onto the property ladder.
Gen H's research indicates that should these proposals be implemented, the intermediary market may not be positioned to quickly close this gap in distribution. Based on Gen H's analysis of the top 100 FTB brokerages by volume in 2025:
- Nearly half (47%) of the top 100 first-time buyer brokerages wrote zero interest only business of any kind for first-time buyers
- Of the 53 brokerages who wrote any interest-only business for first-time buyers, this type of mortgage comprised a median of just 0.25% of their own first-time buyer volumes
- The percentage of interest only (of all first-time buyer business) across the 53 brokerages varies widely, with just seven firms doing over 1% on interest only (over 4x the median). Directly authorised brokerages were twice as likely than authorised representatives to use interest-only products with first-time buyers
- Across the whole UK intermediary market, less than 0.5% of first-time buyer mortgages are interest only or part and part
Since its launch in June 2025, Gen H's own interest-only proposition – distinct owing to its 95% LTV part and part limit – has found greater resonance in the first-time buyer market. To date, 18% of the lender's interest only and part and part applications have come from
first-time buyers. This is 7.5x higher than the industry average, where less than 2.5% of all interest only products are taken by first-time buyers. 30% of the lender's part and part applicants are first-time buyers.
In its consultation paper, the FCA describes its proposals as targeted rather than a total relaxation of rules around interest only lending. But its own feedback statement (FS25/6, Dec 2025) found that since 2013, sales of any kind of interest only product to first-time buyers have stayed below 0.5% of all sales, a figure that hasn't shifted even as the FCA retired its more restrictive interest-only guidance, FG13/7, earlier in 2025. This suggests the intermediary market may be hesitant to embrace these products for first-time buyers.
Sara Palmer, Sales and Distribution Director at Gen H, said, “A year on from launching our interest-only proposition, we have been really pleased to see so many first-time buyers take an interest only mortgage with us. When we look at the cases, we see there’s no other way the affordability could’ve worked – these are mortgages that are fine-tuned to the borrower with the help of their broker. These are clients that brokers weren’t previously able to support. In targeting affordability constraints or helping keep monthly payments lower, interest only products can create truly incremental homeowners – and we’re on a mission to help the intermediary market get comfortable and confident advising on these underutilised products.”
Richard Merrett, Managing Director at Alexander Hall, said, “Interest only mortgages have been saddled by stigma since the financial crash, and I can appreciate how the intermediary market approaches these products with great care. But today’s regulatory environment is materially different; lenders use much stricter criteria and brokers are required to demonstrate suitability as they advise their clients. It’s time to revisit the interest only structure with a view to resolving the abiding affordability challenges that so many aspiring homeowners face. Brokers don’t typically recommend interest only solely because the customer doesn’t want to pay capital off – it is more about structuring the monthly payment to fit their budget. This might be to suit income structure, for example, if they receive an annual bonus, or because they are deferring making capital reductions whilst they spend money on the home or other immediate priorities. A great example of this is with nursery fees – many people buy a new home once they have a child, and may have a temporarily raised outlay prior to them starting school. Interest only can be a great way to reduce the monthly outlay initially to ensure payments are comfortably manageable with a view to prioritising repayment in the future.”
