Interest-only mortgage lending continued to contract in 2025, with UK Finance data showing a 17.7% annual fall in pure interest-only homeowner mortgages. The latest figures also highlight a long-term shift in the composition of the market, with higher loan-to-value interest-only lending declining sharply and fewer loans approaching maturity without a repayment plan in place.
There were 445,000 pure interest-only homeowner mortgages outstanding at the end of 2025, a 17.7% decrease compared with 2024. In addition, there were 156,000 partial interest-only (part and part) homeowner mortgages outstanding, down 10.3% year-on-year.
Overall, the total interest-only mortgage stock (including part and part) has fallen significantly since 2012, declining by 81% in number and 65% in value since data collection began.
Within the total, higher loan-to-value (over 75%) interest-only lending continued to reduce, falling by 26.9% in 2025. These higher LTV loans now account for just 4% of the total stock, compared with 36% in 2012.
Meanwhile, the number of interest-only loans due to mature by 2027 also fell sharply, decreasing by 50% in 2025 to 60,000 loans, following a reduction of 60,000 over the year.
Richard Pike, sales and marketing director at Phoebus Software providers insight into the data:
“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.”
