Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
Brokers Remain Cautious on Interest-Only Mortgages for First-Time Buyers
Most UK mortgage advisers remain hesitant to offer interest-only mortgages to first-time buyers, according to new research highlighted by Gen H. This comes despite the Financial Conduct Authority (FCA) consulting on proposals to widen access to such products.
Analysis by Gen H, ahead of the FCA consultation deadline on 28 July, found that 47% of the top 100 brokerages wrote no interest-only mortgages for first-time buyers in 2025. Among the 53 brokerages that did arrange any interest-only business for first-time buyers, these deals made up an average of just 0.25% of their first-time buyer volumes.
The research also found that directly authorised brokerages were twice as likely as appointed representatives to use interest-only products with first-time buyers. Gen H reported that take-up of its own interest-only proposition by first-time buyers is much higher than the industry average. The lender offers a part-and-part mortgage, with up to 95% loan-to-value on the interest-only portion and the remainder on a repayment basis. To date, 18% of Gen H’s interest-only and part-and-part applications have come from first-time buyers, which is 7.5 times higher than the industry average, where less than 2.5% of all interest-only products are taken by first-time buyers.
The FCA’s consultation paper describes its proposals as targeted, rather than a wholesale relaxation of rules around interest-only lending. The FCA’s feedback statement (FS25/6), published in December 2025, found that since 2013, sales of interest-only products to first-time buyers have remained below 0.5% of all first-time buyer mortgages. This figure has not changed, even after the FCA withdrew its more restrictive interest-only guidance, FG13/7, earlier in 2025. This suggests that the intermediary market may still be hesitant to embrace these products for first-time buyers.
For UK letting agents and inventory clerks, these findings indicate that interest-only mortgages remain a niche option for first-time buyers, with limited uptake across the market. The ongoing FCA consultation and lender initiatives may influence future trends, but current data shows that most brokers continue to approach these products with caution.
Source: Mortgage Strategy