UK Finance has released its interest-only mortgages data for 2024 revealing a significant drop in in interest-only mortgage stock of 17% over the year.
This analysis covers pure and partial interest-only homeowner mortgages as well as maturity and loan-to-value (LTV) profiles.
The same review criteria also revealed a reduction by 78% in number and 61% in value since 2012, the first year this data was collected.
The research also found that there were 541,000 pure interest-only homeowner mortgages outstanding at the end of 2024, 18.5% fewer than in 2023. In addition there were 174,000 partial interest-only (part and part) homeowner mortgages outstanding at the end of 2024, 13% fewer than in 2023.
In addition, the number of interest-only loans set to mature by 2027 shrank by 67,000 in 2024 to 120,000 loans, a fall of 35.8%, while within the total, the number of interest-only loans at higher (over 75%) loan-to-values fell by 25.7% in 2024. Loans at these higher LTVs now make up just 5% of the total, compared with 36% in 2012.
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 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.
“It is particularly encouraging that the number of interest-only loans at higher loan-to-value 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.
“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.”
Toby Leek, president of NAEA (National Association of Estate Agents) Propertymark, added: “We have seen much turbulence in the wider economy over the last few years and while interest-only mortgages can be an attractive proposition for some, the conditions must be right for such an undertaking. We have witnessed an unfavourable mix of higher inflation and elevated base rates over the past few years, which has made many interest only mortgages less attractive and potentially more of a risk to consider.”
