The whole variety of interest-only mortgages held by householders, together with half and half loans, fell by 17% final 12 months, knowledge from a commerce physique confirmed.
According to UK Finance, this comprised 541,000 pure interest-only mortgages, an 18.5% contraction on 2023, and 174,000 partial interest-only mortgages, 13% fewer than the 12 months earlier than.
The worth of excellent pure interest-only mortgages was 13% decrease year-on-year at £116bn, whereas there was a 7% fall in the worth of half and half loans, totalling £39bn by the tip of 2024.
Charles Roe, director of mortgages at UK Finance, mentioned: “In 2024, clients with interest-only mortgages continued to pay on or forward of schedule, with 150,000 fewer mortgages on interest-only phrases on the finish of the 12 months than in the beginning.
“Lenders’ proactive communications methods proceed to make sure that these with historic[al] interest-only loans have plans and the flexibility to repay, with tailor-made assist accessible for individuals who don’t. The interest-only e-book has shrunk in measurement every year for the reason that finish of the monetary disaster and is now round one-fifth of the quantity seen in 2012, when these knowledge had been first collected.”
Significant fall in high-LTV interest-only mortgages
Within this, the variety of interest-only loans at above 75% mortgage to worth (LTV) shrank by 25.7% to 26,000. UK Finance discovered that loans at larger LTVs accounted for simply 5% of all interest-only mortgages, in comparison with 36% in 2012.
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This was the LTV bracket with the most important decline, as loans at 50-75% LTV fell by 1 / 4 to 102,000 and mortgages at 25-50% LTV shrank by 19% to 232,000.
The variety of interest-only loans at lower than 25% LTV diminished by 13% to 180,000.
Further, the variety of interest-only loans set to mature by the tip of 2027 fell by 67,000 final 12 months to 120,000 loans, a 35.8% decline.
Roe mentioned: “It is especially encouraging that the variety of interest-only loans at larger LTV ratios has fallen sharply – round twice the general contraction – with an analogous motion in these loans set to mature over the following two years.
“Those clients whose loans are theoretically most in danger proceed to redeem forward of time, lowering the chance profile of the remaining interest-only e-book.”
He added: “The small variety of debtors who don’t repay instantly upon maturity stays very low, and knowledge constantly point out the overwhelming majority of those do in truth repay in full over the primary few months following the tip of time period.
“As at all times, any clients nervous about repaying their mortgage ought to contact their lenders early, who stand prepared to assist with a variety of choices to repay.”
