At the end of January, the FCA published the results of its latest thematic review into interest only mortgages. These surged in the years leading up to the financial crisis, and they are seen by the regulator as something of a ticking bomb. This IFS report provides important context to help understand what may be happening.
One group of interest only mortgages is maturing at the moment, but the FCA is more worried about the next two peaks, in 2027/28 and 2032, which cover less wealthy consumers with higher income multiples.
The thrust of the latest FCA findings is that consumers aren't engaging with firms' warnings, and it is urging firms to improve their strategies. To help, it has published some research into consumers' motivations.
However, it's also worth looking at the wider context. For instance, the IFS reports that real house prices rose over 150% in the 20 years to 2015/16, compared to only 22% for average family incomes.
Given this, it's hard not to imagine that it will remain hard to convince interest only consumers that they will have trouble selling their houses at a profit, no matter how effective firms' communication becomes.
If interest rates start to rise, this may change, especially for those consumers who bought at a high income multiple and are trapped in variable rate deals. But equally, these are the consumers are least likely to have a straightforward get-out!
Of course the mortgage market is very different now to pre-2007, and much harder for young people to enter. Which takes us back into consumer credit and the other financial choices they might be making. And the different problems that may be getting stored up for the future.
Although it's an obvious statement, I'm still continually struck by how much of the UK economy pivots around the housing market. Yet we still, I think - firms, consumers and regulators, tend to see it too much in isolation. Almost always it's the elephant in the room.
The falls in homeownership have been sharpest for young adults with middle incomes. In 1995–96, 65% of those aged 25–34 with incomes in the middle 20% for their age owned their own home. Twenty years later, that figure was just 27%.