The UK Finance interest-only mortgage update showed there were 10.3% fewer part and part mortgages at the end of last year, totalling 156,000.
The value of outstanding interest-only mortgages dropped by 15% to £99bn, while there was a 3% rise in the value of part and part mortgages, standing at £40bn.
Since 2021, when the data was first collected, the total stock of interest-only mortgages, including part and part loans, has fallen by 81% in number and 65% in value.
The number of higher-loan-to-value (LTV) interest-only loans, over 75%, fell by 26.9% last year. This accounted for 4% of all interest-only stock, compared to 36% in 2012.
Further, UK Finance said the number of interest-only loans set to mature by 2027 had reduced by 60,000 in 2025, a 50% fall.
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Interest-only borrowers in a stronger position
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[al] interest-only loans have plans and ability to repay, with tailored help available for those who do not.”
Tatch said the interest-only mortgage book had shrunk each year since 2012, and was now less than one-fifth of the size of the market during that year.
The interest-only loans that remain are “in a far stronger position”, Tatch said, with over two-thirds of borrowers on LTVs of less than 50%.
He added: “This gives a much greater range of options if they cannot immediately repay their loan when it matures.”
Tatch said: “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.”
Tatch said UK Finance also looked forward to responding to the Financial Conduct Authority’s (FCA’s) proposals on interest-only mortgages.
Last week, the regulator suggested changes to when borrowers needed to demonstrate a repayment strategy.
