The number of outstanding interest-only mortgages fell by almost 18% to 445,000 at the end of 2025 compared to 2024, data from UK Finance shows.
The number of outstanding mortgages with some interest-only and some repayment also fell by more than 10% to 156,000 in the same period.
Total interest-only stock, including purely interest-only shares and part-and-share products, has fallen by 81% since 2012, when UK Finance started collecting the data.
At the time, the FCA, then the Financial Services Authority, warned of a ‘ticking time bomb’ with many borrowers left without a realistic repayment plan.
Since then, lenders have been contacting borrowers to ensure they set up appropriate repayment plans before their loans reach maturity.
The latest UK financial data also shows that the number of interest-only mortgages with a loan-to-value above 75% will fall by 27% by 2025.
Loans at these higher LTVs now make up just 4% of the total, compared to 36% in 2012.
In addition, the number of interest-only loans maturing in 2027 has fallen by 50% in 2025 to 60,000 loans.
James Tatch, head of analysis at UK Finance, said: “In 2025, customers with interest-only mortgages continued to pay at or ahead of schedule, with 114,000 fewer interest-only mortgages at the end of the year than at the start.
“Lenders’ proactive communications strategies continue to ensure that people with historic interest-only loans have plans and options to repay, with tailored help available for those who don’t.
“The interest-only book has shrunk in size every year since the end of the financial crisis and is now less than a fifth of its size in 2012, when this data was first collected.
“The remaining interest-only book is also in a much stronger position, with over two-thirds of customers having a loan-to-value ratio of less than 50%. This gives a much wider range of options if they cannot immediately repay their loan when it matures.
“There are now 60,000 loans left in the second group of interest-only loans that the regulator identified in 2013 – loans with a term between 2021 and 2027.
“This is just 7% of the size of this segment in 2012, which is strong evidence that, like the first cohort, almost all customers are continuing to pay on or ahead of schedule.
“The small number of borrowers who do not repay immediately at maturity remains very low, and data consistently shows that the vast majority of these actually repay in full within the first few months of term end.”
But he adds: ‘While the overall size of outstanding interest-only loans continues to decline, we have seen a small increase in lending, on a partial basis.
“This signals its potential as a tool to help close the affordability gap, where appropriate to the customer’s circumstances.
“We look forward to responding to the FCA’s proposals on its interest-only framework.”
Mary-Lou Press, president of the National Association of Estate Agents (NAEA), said: “These figures highlight the continued decline in interest-only loans and suggest that lenders’ proactive engagement with borrowers is having a positive impact.
“The 50% reduction in the number of loans due in 2027 indicates that many homeowners are making repayment plans well before the end of their mortgage term.
“Some may pay back their capital early, while others may switch to repayment mortgages, refinance or move to later life loans.
“The sharp decline in higher loan-to-value interest-only loans is particularly encouraging, indicating a healthier risk profile across the market.
“With more borrowers having significant equity in their homes, many now have more flexibility and more options available to them when their mortgage comes to an end.
“While some borrowers will still need support, the overall trend suggests that risk in the mortgage market continues to decline and homeowners are better prepared for repayment than they were a decade ago.”