The stock of interest-only mortgages in the UK has seen a significant decline, with the number of outstanding loans decreasing by nearly 18% to 445,000 by the end of 2025. This trend reflects a broader shift in the mortgage market, as borrowers increasingly move towards repayment options and lenders engage more proactively with their clients.
What is the current state of interest-only mortgages?
According to recent data, the total stock of interest-only mortgages, which includes both purely interest-only and part-and-part mortgages, has decreased by 81% since 2012. The number of part interest-only and part repayment mortgages also fell by just over 10% to 156,000 during the same period. This consistent decline highlights a significant shift in borrower preferences and lending practices.
How have loan-to-value ratios changed?
Another notable trend is the reduction in interest-only mortgages with loan-to-values (LTVs) above 75%, which dropped by 27% in 2025. These higher LTV loans now constitute only 4% of the total interest-only mortgage stock, a stark contrast to 36% back in 2012. This shift indicates that borrowers are either paying down their loans or opting for lower-risk borrowing options.
What does this mean for current borrowers?
For borrowers currently holding interest-only mortgages, the data suggests a more robust repayment environment. Over two-thirds of remaining interest-only mortgage holders have an LTV ratio of less than 50%, indicating a stronger financial position. Additionally, the number of interest-only loans set to mature by 2027 has halved to 60,000, suggesting that many borrowers are proactively addressing their repayment plans ahead of time. This could involve switching to repayment mortgages or refinancing options.
What does this mean for lenders and the market?
Lenders are likely to view the decline in interest-only mortgages as a positive development, as it reflects improved borrower engagement and responsible lending practices. The proactive measures taken by lenders to assist borrowers in managing their repayment strategies appear to be effective. This trend could influence future lending policies, encouraging more emphasis on repayment options and lower-risk mortgage products.
Frequently asked questions
What are the implications of the decline in interest-only mortgages?
The decline suggests a shift towards more sustainable borrowing practices, with borrowers increasingly prioritising repayment. This trend may lead to more stringent lending criteria and a focus on lower-risk mortgage products.
How should borrowers prepare for maturing interest-only loans?
Borrowers with interest-only loans maturing soon should consider their repayment options now. This may include switching to a repayment mortgage, refinancing, or exploring later-life lending options to ensure they are prepared for the end of their mortgage term.