Number of interest-only mortgages halved since 2015

Based on new analysis from the Financial Conduct Authority (FCA), the fall is a result of borrowers moving in greater numbers onto repayment loans or repaying earlier than expected. Additionally, of those remaining, the greatest number of interest-only mortgages are set to mature in 2031 and 2032 to 72,000 and 77,000, with a smaller peak in 2027.  

This means borrowers without a repayment plan still have time to act and reduce at least some of their outstanding capital by the end of their mortgage. Additionally, in consumer research commissioned by the regulator it found 78% of borrowers were aware of the need to have a repayment plan in place when they took out the mortgage.  

It also showed 82% of borrowers were confident in their ability to repay the outstanding capital at the end of the mortgage term, although the research suggests this may be overly optimistic – while 36% of borrowers expected some shortfall, modelling suggests could be closer to 46%.  

The FCA’s director of retail banking David Geale said: “Whilst it is encouraging to see the number of interest-only mortgages reducing faster than expected, with the majority of loans being paid off or transferred to other products, the challenge remains for a significant number of borrowers.

“Taking an interest-only mortgage can mean lower monthly payments, but borrowers need a plan to repay the outstanding balance when the mortgage comes to an end. If you have an interest-only mortgage and are unsure if your current plan is sufficient, speak to your lender as soon as possible, to discuss your options.”