There were 445,000 pure interest-only homeowner mortgages outstanding at the end of 2025, 17.7% fewer than in 2024, according to the latest figures from UK Finance.
In addition there were 156,000 partial interest-only (part and part) homeowner mortgages outstanding, 10.3% fewer than in 2024.
The total interest-only mortgage stock has reduced by 81% in number and 65% in value since 2012, when the data was first collected.
Within the total, the number of interest-only loans at higher (over 75%) loan-to-values fell by 26.9% in 2025. Loans at these higher LTVs now make up just 4% of the total, compared with 36% in 2012.
Additionally, the number of interest-only loans set to mature by 2027 shrank by 60,000 in 2025 to 60,000 loans, a fall of 50%.
James Tatch, head of analytics at UK Finance, said: “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. Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and ability to repay, with tailored help available for those who do not. 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. 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%. 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 7% 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. The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently show the vast majority of these do in fact repay in full over the first few months following the end of term. As always, any customers worried about repaying their mortgage should contact their lenders early, who stand ready to help with a range of options to repay.
"Although the overall stock of outstanding interest-only loans continues to decline, we have seen a small increase in lending on a part-and-part basis. This signals its potential as a tool to help plug the affordability gap, where appropriate for the customer's circumstances. We look forward to responding to the FCA’s proposals on its interest-only framework."
Mary-Lou Press, president of NAEA Propertymark, commented: “These figures highlight the continued decline of interest-only borrowing and suggest that lenders’ proactive engagement with borrowers is having a positive impact.
“The 50% reduction in loans due to mature by 2027 indicates that many homeowners are addressing repayment plans well before the end of their mortgage term. Some may be repaying capital early, while others are switching to repayment mortgages, refinancing, or moving to later-life lending options.
“The sharp fall in higher loan-to-value interest-only loans is particularly encouraging, pointing to a healthier risk profile across the market. With more borrowers holding substantial equity in their homes, many now have greater flexibility and more options available when their mortgage matures.
“While some borrowers will still require support, the overall trend suggests that risk within the mortgage market continues to decline and that homeowners are better prepared for repayment than they were a decade ago."
Richard Pike, sales and marketing director at Phoebus Software, added: "Interest-only mortgages have often attracted criticism over the years, but the reality is that they remain an entirely appropriate solution when used responsibly and supported by a credible repayment strategy. The steady reduction in the stock of interest-only lending reflects not only the work lenders have done to engage with borrowers, but also the changing shape of the market itself.
"What we are increasingly seeing is a shift towards later life lending and more flexible borrowing into retirement. A growing number of lenders are recognising that many older borrowers have built up substantial equity in their homes and have the income and means to continue borrowing safely beyond traditional retirement ages.
"Borrowing into retirement is often a lower-risk option than forcing borrowers to repay capital through the sale of their home, particularly when loan-to-values are modest and there is significant housing wealth available. For many customers, it provides continuity, flexibility and a better outcome than downsizing or facing a cliff edge at the end of their mortgage term.
"The UK Finance figures demonstrate just how much progress has been made since the financial crisis. The remaining interest-only book is far healthier, with lower loan-to-values and fewer loans approaching maturity without a plan in place. At the same time, the growth of later life lending and retirement interest-only products is providing borrowers with more options than ever before.
"Ultimately, this isn't the death of interest-only lending. It's the evolution of a market that is adapting to longer lives, changing retirement patterns and the reality that housing wealth will play an increasingly important role in helping people maintain their financial wellbeing in later life."
