Interest-only mortgages fell below 10% of the market for the first time in five years, research from homebuying platform OneDome found.
There were 847,077 interest-only mortgages outstanding in the second half of 2024, making up a 9.5% share, according to a Freedom of Information request to the Financial Conduct Authority (FCA).
This was down from 1,122,469 in the first half of 2020, a drop of 24.5%.
The number of part interest-only, part repayment mortgages also fell, from 302,848 to 208,825 over the same period, a 31% drop.
Babek Ismayil, founder and CEO of OneDome, said: “Interest-only mortgages became an increasingly popular option as buyers took the opportunity to stretch their budgets as far as possible.
“But it looks like the honeymoon is over, and the steady decline we’re seeing is a symptom of a market that has become more cautious and regulated.
“Lenders and home-buyers are increasingly conscious of the need for a plan to repay the loan capital, and interest-only mortgages are falling further out of favour.”
Ismayil added: “The change is a positive step, and it shows the need to keep thinking about how we think about home finance.
“The current transaction process is disjointed and that is why we are committed to changing the way people buy property.
“The only way to speed up the process is through better sales coordination and project management, and that’s where new technology can help deliver results.”
He said: “The entire transaction process should be under one roof. With greater innovation and flexibility, we can reduce transactions down to a matter of days instead of weeks or months.”
