The number of outstanding interest-only homeowner mortgages fell sharply again last year, continuing a long-term decline in the sector, according to new figures from UK Finance.

At the end of 2025, there were 445,000 pure interest-only mortgages outstanding, down 17.7% on the previous year. A further 156,000 part-and-part mortgages remained in place, representing a 10.3% annual decline.

The figures mean the overall interest-only mortgage stock has fallen by 81% in volume and 65% in value since UK Finance began tracking the data in 2012. Higher loan-to-value interest-only lending has seen an even steeper reduction, with loans above 75% LTV falling by 26.9% during 2025 and now accounting for just 4% of the total interest-only market, compared with 36% more than a decade ago.

The number of loans due to mature by 2027 also halved during the year, falling from 120,000 to 60,000, suggesting fewer borrowers are approaching maturity without having addressed their repayment plans.

James Tatch, head of analytics at UK Finance, said: “In 2025, customers with interest-only mortgages continued to pay on or ahead of schedule, with 114,000 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 interest-only loans have plans and 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 less than one fifth of that seen in 2012, when these data were first collected. The remaining interest-only book is also in a far stronger position, with over two thirds of customers having a loan-to-value ratio of less than 50%. This gives a much greater range of options if they cannot immediately repay their loan when it matures.

“There are now 60,000 loans remaining in the second distinct cohort of interest-only loans identified by the regulator in 2013 – those maturing between 2021 and 2027. This is just 7% of the size of this segment in 2012, providing 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 upon maturity remains very low, and data consistently show 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.

“Although the overall stock of outstanding interest-only loans continues to decline, we have seen a small increase in lending on a part-and-part basis. This signals its potential as a tool to help plug the affordability gap, where appropriate for the customer’s circumstances. We look forward to responding to the FCA’s proposals on its interest-only framework.”