Stock now less than one-fifth of 2012 peak
The number of interest-only homeowner mortgages in the UK declined significantly in 2024, according to the latest figures released by UK Finance.
The report shows a 17% reduction in the total stock of interest-only loans, which includes both pure and part-and-part interest-only products. This marks a continued downward trend since the financial crisis, with the number of interest-only loans dropping by 78% and their value decreasing by 61% since 2012, when the trade body began tracking this data.
At the end of 2024, there were 541,000 pure interest-only homeowner mortgages outstanding — 18.5% fewer than a year earlier. A further 174,000 partial interest-only loans were recorded, down 13% from 2023.
Loans with higher loan-to-value (LTV) ratios saw an even steeper drop. Mortgages with LTVs over 75% fell by 25.7% during the year and now represent just 5% of the total interest-only market, compared with 36% in 2012.
There was also a notable decline in the number of loans due to mature by 2027, which shrank by 67,000 to 120,000—representing a 35.8% decrease.
Data analysis also suggests that this downward trend is set to continue. Based on the latest UK Finance figures, the firm projects that interest-only products could account for as little as 2% of the UK’s residential mortgage market by 2034.
“In 2024, customers with interest-only mortgages continued to pay on or ahead of schedule, with 150,000 fewer mortgages on interest-only terms at the end of the year than at the start,” said Charles Roe (pictured left), director of mortgages at UK Finance. “Lenders' proactive communications strategies continue to ensure that those with historic interest-only loans have plans and the ability to repay, with tailored help available for those who do not.”
Roe noted that the portion of high-LTV loans had declined at nearly twice the pace of the overall market contraction. “It is particularly encouraging that the number of interest-only loans at higher loan-to-value ratios has fallen sharply—around twice the overall contraction — with a similar movement in those loans set to mature over the next two years,” he said.
He added that only a small number of borrowers fail to repay their loans upon maturity, with most settling their debts within a few months of term-end. “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,” Roe said.
“We have seen much turbulence in the wider economy over the last few years, and while interest-only mortgages can be an attractive proposition for some, the conditions must be right for such an undertaking,” added Toby Leek (pictured right), president of the NAEA Propertymark. “We have witnessed an unfavourable mix of higher inflation and elevated base rates over the past few years, which has made many interest-only mortgages less attractive and potentially more of a risk to consider.”
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