The UK’s historic interest-only mortgage book continued its long-term decline during 2025 but industry figures suggest interest-only lending could play a growing role in helping borrowers bridge affordability gaps in the future.
New figures from UK Finance show there were 445,000 pure interest-only homeowner mortgages outstanding at the end of 2025, down 17.7% year-on-year. Partial interest-only, or part-and-part, mortgages also fell by 10.3% to 156,000 loans.
Overall, the number of interest-only mortgages has fallen by 81% since 2012, when UK Finance first began collecting the data. The value of the outstanding book has reduced by 65% over the same period.
The quality of the remaining stock has also improved significantly. Loans with loan-to-value ratios above 75% now account for just 4% of all interest-only mortgages, compared with 36% in 2012. At the same time, the number of loans due to mature by the end of 2027 has halved during the last year, falling from 120,000 to 60,000.
REPAYMENT PLANS
The figures are likely to reassure lenders and regulators that the vast majority of borrowers with historic interest-only mortgages continue to meet their repayment plans.
However, UK Finance said there are signs that part-and-part mortgages could become increasingly relevant as lenders and regulators explore ways to address affordability pressures.
James Tatch (main picture, inset), Head of Analytics at UK Finance, says: “In 2025, customers with interest-only mortgages continued to pay on or ahead of schedule, with 114,000 fewer mortgages on interest-only terms at the end of the year than at the start.
“The interest-only book has shrunk in size each year since the end of the Financial Crisis and is now less than one fifth of that seen in 2012, when these data were first collected.”
STRONGER POSITION
He adds: “The remaining interest-only book is also in a far stronger position, with over two thirds of customers having a loan-to-value ratio of less than 50 per cent. This gives a much greater range of options if they cannot immediately repay their loan when it matures.
“There are now 60,000 loans remaining in the second distinct cohort of interest-only loans identified by the regulator in 2013 – those maturing between 2021 and 2027.
“This is just seven per cent of the size of this segment in 2012, providing strong evidence that, like the first cohort, almost all customers are continuing to pay on or ahead of schedule.”
