The total number of interest-only mortgages held by homeowners, including part and part loans, fell by 17% last year, data from a trade body showed.
According to UK Finance, this comprised 541,000 pure interest-only mortgages, an 18.5% contraction on 2023, and 174,000 partial interest-only mortgages, 13% fewer than the year before.
The value of outstanding pure interest-only mortgages was 13% lower year-on-year at £116bn, while there was a 7% fall in the value of part and part loans, totalling £39bn by the end of 2024.
Charles Roe, director of mortgages at UK Finance, said: “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.
“Lenders’ proactive communications strategies continue to ensure that those with historic[al] interest-only loans have plans and the ability to repay, with tailored help available for those who do not. The interest-only book has shrunk in size each year since the end of the financial crisis and is now around one-fifth of the number seen in 2012, when these data were first collected.”
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Significant fall in high-LTV interest-only mortgages
Within this, the number of interest-only loans at above 75% loan to value (LTV) shrank by 25.7% to 26,000. UK Finance found that loans at higher LTVs accounted for just 5% of all interest-only mortgages, compared to 36% in 2012.
This was the LTV bracket with the largest decline, as loans at 50-75% LTV fell by a quarter to 102,000 and mortgages at 25-50% LTV shrank by 19% to 232,000.
The number of interest-only loans at less than 25% LTV reduced by 13% to 180,000.
Further, the number of interest-only loans set to mature by the end of 2027 fell by 67,000 last year to 120,000 loans, a 35.8% decline.
Roe said: “It is particularly encouraging that the number of interest-only loans at higher LTV ratios has fallen sharply – around twice the overall contraction – with a similar movement in those loans set to mature over the next two years.
“Those customers whose loans are theoretically most at risk continue to redeem ahead of time, reducing the risk profile of the remaining interest-only book.”
He added: “The small number of borrowers who do not repay immediately upon maturity remains very low, and data consistently indicate 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.”
