Advisers are still wary of using interest-only deals for first-time buyers, despite FCA advice on how to increase access, new research shows.
Analysis by Gen H prior to the end of the consultation on July 28 shows that 47% of the top 100 real estate agents will not have taken out interest-only mortgages for first-time buyers in 2025.
Of the 53 brokers who wrote interest-only contracts for FTBs, this represented on average just 0.25% of their FTB volumes.
Directly authorized agents were twice as likely as designated agents to use interest-only products with first-time buyers.
General H says that adoption of his own interest-only proposal by FTBs is much higher than the industry average.
It offers a partial proposal, with a loan-to-value ratio of up to 95% on an interest-only basis and the rest on a repayment basis.
To date, 18% of the lender’s interest-only and part-share applications have come from first-time buyers.
This is 7.5 times higher than the sector average, where less than 2.5% of all interest-only products are purchased by starters.
In its consultation document, the FCA describes its proposals as targeted and not as a general relaxation of the rules around interest-only loans.
However, the feedback statement (FS25/6), published in December 2025, shows that sales of interest-only products to first-time buyers have remained below 0.5% of all first-time mortgages since 2013.
This figure has not changed even after the FCA withdrew its more restrictive interest rate guidance, FG13/7, earlier in 2025, suggesting that the intermediate market is still reluctant to embrace these starter products.
Gen H distribution director Sara Palmer says: “A year on from the launch of our interest-only proposition, we are very pleased to see so many first-time buyers taking out an interest-only mortgage with us.
“When we look at the cases, we see that affordability could not have worked any other way – these are mortgages that have been tailored to the borrower with the help of their broker.
“These are customers that brokers were previously unable to support.
“By addressing affordability constraints or helping keep monthly payments lower, interest-only products can truly create more homeowners – and we are on a mission to help the intermediary market comfortably and confidently advise on these underutilized products.”
Richard Merrett, director of Alexander Hall, said: “Since the financial crisis, interest-only mortgages have come with a stigma, and I appreciate how the intermediary market is approaching these products with great care.
“But the current regulatory environment is significantly different; lenders have much stricter criteria and brokers must demonstrate their suitability when advising their clients.
“It is time to rethink the interest-only structure with an eye to solving the affordability issues that so many aspiring homeowners face.
“Real estate agents usually don’t recommend interest just because the client doesn’t want to pay off the capital. It’s more about structuring the monthly payment so that it fits their budget.
“This could be because they fit an income structure, for example if they receive an annual bonus, or because they defer capital repayments while they spend money on the house or other immediate priorities.
“A good example is childcare allowances. Many people buy a new house as soon as they have a child and have temporarily higher expenses before their child goes to school.
“Interest alone can be a great way to reduce monthly expenses initially, keeping payments comfortably manageable while allowing borrowers to prioritize capital repayments in the future.”