Homeowners with interest-only mortgages continue to decline in numbers, falling by 5.4% year-on-year to 664,000 by the end of 2023 according to UK Finance.
Despite an overall drop in the volume of interest-only mortgages, a rise in numbers was recorded in higher loan to value (LTV) brackets (low deposit).
Further, 200,000 part and part homeowner mortgages remained outstanding at the end of last year, an annual fall of 9.9%.
Since 2012, when trade body UK Finance began collecting data, the total stock of interest-only mortgages has fallen by 73% in number and 56% in value.
Interest-only rise at higher LTV brackets
The number of interest-only loans secured on homes with an LTV between 50% LTV and 75% LTV rose by 6% to 136,000 last year.
In the 75%-plus LTV bracket, volumes rose 3% to 35,000. The report revealed that loans at 75% LTV or above now make up just 5% of the total stock compared with 36% in 2012.
Shrinking interest-only maturities
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%. Their value fell by 27% to £27bn.
Meanwhile those maturing from 2028 onwards rose by 2% to 650,000, increasing in value by 7% to £145bn.
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 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.”
Related: Mortgage extensions and interest-only switching could raise debt burden on borrowers
