UK Finance data shows continued reduction in outstanding interest-only loans, with higher-LTV lending declining sharply
The number of pure interest-only homeowner mortgages outstanding fell by 17.7% in 2025 to 445,000, according to new figures from UK Finance.
A further 156,000 part-and-part mortgages were outstanding at the end of the year, down 10.3% on 2024. Combined, the total interest-only stock — including part-and-part — has declined by 81% in number and 65% in value since 2012, when UK Finance began collecting the data.
Interest-only loans at higher loan-to-value ratios — those above 75% — fell by 26.9% during 2025. Such loans now account for just 4% of the total interest-only book, compared with 36% in 2012.
The number of interest-only loans due to mature by 2027 dropped by 60,000 over the course of 2025 to stand at 60,000 — a fall of 50%.
"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," said James Tatch (pictured right), head of analytics at UK Finance.
"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."
Tatch added that 60,000 loans remain within the second 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," he said.
"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."
On the part-and-part segment, Tatch noted a modest uptick in new lending. "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," he said. "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."
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