Interest-Only Mortgages See Significant Decline in 2023

According to the latest data from UK Finance, interest-only homeowner mortgages fell by 5.4% to 664,000 last year, compared to 12 months prior. This decline is part of a larger trend, with the total interest-only mortgage stock decreasing by 73% in number and 56% in value since 2012.

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Partial interest-only home loans also saw a significant drop, falling by 9.9% to 200,000 over the same period. While the overall interest-only stock continues to fall, the number of interest-only loans at higher loan-to-values (LTVs) actually increased by 2.9% in 2023. However, these higher LTV loans now make up just 5% of the total, compared to 36% in 2012.

“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.” - Charles Roe, UK Finance director of mortgages

The number of interest-only loans set to mature by 2027 also decreased by 28.4% in 2023 to 187,000 loans. This decline is a positive sign for the mortgage market, as it indicates that borrowers are taking steps to repay their loans on time.

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UK Finance emphasizes the importance of regular communication between lenders and borrowers, particularly for those struggling with mortgage repayments. Lenders offer a range of support to anyone worried about their finances, with teams of trained experts ready to help.

In conclusion, the decline of interest-only mortgages is a welcome trend in the mortgage market. As the market continues to evolve, it’s essential for borrowers to stay informed and communicate regularly with their lenders to ensure they’re on track to repay their loans.