The number of interest-only homeowner mortgages in the UK has experienced a substantial drop, decreasing by nearly a fifth over the past year. New figures released by UK Finance reveal that at the end of 2025, there were 445,000 pure interest-only mortgages outstanding, marking a 17.7% reduction from the previous year. An additional 156,000 part-and-part mortgages, which combine elements of interest-only and capital repayment, also saw a 10.3% annual decline.
This latest decrease extends a long-term trend of contraction in the interest-only mortgage sector. Since UK Finance began tracking this data in 2012, the overall interest-only mortgage stock has fallen by an impressive 81% in volume and 65% in value. This significant reduction reflects a concerted effort by lenders and regulators to mitigate risks associated with these types of loans, particularly after the financial crisis highlighted potential issues for borrowers who reached the end of their mortgage term without a clear repayment strategy.
A notable aspect of the new data is the halving of loans due to mature by 2027, falling from 120,000 to 60,000 during the year. This suggests that fewer borrowers are approaching their mortgage maturity date without having established a robust plan for repayment. James Tatch, head of analytics at UK Finance, emphasised that customers with interest-only mortgages continue to pay on or ahead of schedule, attributing this positive trend to proactive communication strategies from lenders.
The remaining interest-only mortgage book is now considered to be in a much stronger position. Over two-thirds of these customers hold a loan-to-value (LTV) ratio of less than 50%. This lower LTV provides a significantly greater range of options for borrowers if they are unable to immediately repay their loan when it matures, offering a stronger equity buffer compared to a decade ago when higher LTV interest-only lending was more prevalent. Loans above 75% LTV now account for just 4% of the total interest-only market, a sharp contrast to 36% more than ten years ago.
While the overall stock of outstanding interest-only loans continues its decline, UK Finance noted a small increase in new lending on a part-and-part basis. This suggests its potential as a tool to help bridge the affordability gap for some borrowers, provided it aligns with their individual financial circumstances. The organisation also indicated it looks forward to responding to the Financial Conduct Authority's (FCA) proposals on its interest-only framework, indicating ongoing regulatory scrutiny and potential adjustments in this segment of the mortgage market.