UK Finance said 445,000 pure interest-only homeowner mortgages were outstanding at the end of 2025, 17.7% fewer than in 2024

The number of homeowner interest-only mortgages outstanding dropped last year, according to UK Finance.

Interest-only deals allow borrowers to make monthly payments that just cover the interest on the money borrowed, with the full amount due at the end of the term.

UK Finance said 445,000 pure interest-only homeowner mortgages were outstanding at the end of 2025, 17.7% fewer than in 2024.

In addition, there were 156,000 partial interest-only homeowner mortgages outstanding at the end of 2025 – a 10.3% decline compared with 2024.

The total interest-only mortgage stock has dropped by 81% in number and 65% in value since 2012, when the data was first collected, UK Finance said.

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, he said.

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, he said.

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, he said.

He added: 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.