Number of interest-only mortgages fell 5.4% in 2023

Interest-only homeowner mortgages fell by 5.4% to 664,000 last year compared to 12 months before, the latest data from UK Finance has revealed.

The data showed that there were 200,000 partial interest-only (part and part) homeowner mortgages outstanding at the end of 2023, 9.9 per cent fewer than in 2022. The total interest-only mortgage stock (including part and part) has reduced by 73 per cent in number and 56 per cent in value since 2012 (when these data were first collected).

Although the overall interest-only stock continues to fall, the number of interest-only loans at higher (over 75 per cent) loan-to-values rose by 2.9 per cent in 2023. However, loans at these higher LTVs now make up just five per cent of the total, compared with 36 per cent in 2012. Additionally, the number of interest-only loans set to mature by 2027 shrank by 74,000 in 2023 to 187,000 loans, a fall of 28.4 per cent.

Commenting on the data, Charles Roe, Director of Mortgages at UK Finance, said “Although the mortgage market saw difficult conditions in 2023, most interest-only borrowers continued to repay on or ahead of schedule. The regular communications from lenders will have helped ensure interest-only borrowers remained on track to repay. The number of interest-only mortgages has dropped each year since the end of the financial crisis and fell again last year to around a quarter of the number seen in 2012.

“The number of borrowers who didn’t repay when their mortgage ended remained very low and most of these borrowers did repay within a few months of the term ending. If you are struggling with your mortgage repayments, please reach out to your lender as soon as possible. Lenders offer a range of support to anyone worried about their finances, with teams of trained experts ready to help.”