Why Are More Borrowers Switching to Interest-Only Mortgages?

More homeowners are switching to interest-only mortgages as they look for ways to manage their monthly repayments. The latest figures from the Financial Conduct Authority (FCA) show that 15,200 mortgages switched to interest-only payments during the second quarter of 2026, up from 14,578 in the previous quarter. That’s the highest quarterly figure since the end of 2024 and continues an upward trend that began in 2025.

So, why are more people switching to interest-only mortgages, and what can first-time buyers learn from the trend?

What’s driving the rise in interest-only mortgages?

With a repayment mortgage, your monthly payments generally cover both the interest charged and part of the amount you originally borrowed. With an interest-only mortgage, the monthly payments cover the interest but don’t reduce the capital owed. This can result in lower monthly payments and may provide some breathing room when household budgets are under pressure.

The latest figures suggest that more borrowers are looking at ways to reduce their monthly mortgage commitments, and interest-only isn't the only route being taken. A total of 7,173 mortgages had their terms extended in Q2 2026, compared with 5,543 in the previous quarter.

Looking at the bigger picture, around 354,000 mortgages had their monthly payments reduced through temporary interest-only arrangements or term extensions between July 2023 and June 2026. That's about 3.9% of regulated mortgage contracts and indicates the affordability pressures facing some existing homeowners.

What can first-time buyers learn from this trend?

Interest-only mortgages may be available to some first-time buyers, although repayment mortgages are much more common, and lenders may have specific eligibility and repayment-strategy requirements.

However, this article isn't really about whether a first-time buyer should choose an interest-only mortgage. The more useful lesson from the latest figures is what they tell us about the long-term nature of taking on a mortgage. Your first mortgage will be arranged around your circumstances today, but it could be with you through decades of change.

When you're preparing to buy, it's natural to focus on the immediate questions: how much deposit you'll need, what property you can afford and how much a lender may be prepared to lend you. However, your mortgage could potentially last for 25, 30, 35 years or longer, during which both your finances and your life could look very different.

Your income could increase or decrease, you might change jobs or start a family, and your regular household expenses could change. Your initial mortgage deal will also eventually end, at which point the rates and products available could be different from those available when you first bought.

That's why it's worth looking beyond “How much can I borrow?” and also asking “How much can I comfortably afford?”

Mortgages can change as circumstances change

A mortgage doesn't necessarily remain exactly the same throughout its full term. Depending on your circumstances, lender criteria, and the options available at the time, you may have opportunities to review your deal, remortgage, change the term, or consider other ways to manage your repayments.

The rise in borrowers moving temporarily to interest-only payments or extending their mortgage terms demonstrates how some homeowners are adapting when affordability becomes more challenging. These changes can help make monthly payments more manageable, although it’s important to understand the longer-term implications too.

For example, while switching to interest-only can reduce monthly repayments, you won't be reducing the capital balance through those interest-only payments. Extending a mortgage term can also reduce the monthly commitment but may mean paying interest for longer. Changes like these should be considered as part of a wider, sustainable financial plan rather than focusing solely on the immediate monthly saving.

Think beyond what you can borrow today

For first-time buyers, these figures don't mean you need to predict exactly what your finances will look like in 10 or 20 years, which simply isn't possible. Instead, it's about starting from a comfortable position, understanding your options and remembering that your mortgage may be able to adapt as your circumstances change.

Think about your potential mortgage payment alongside rates, utilities, insurance, everyday living costs and the unexpected expenses that can come with owning a home. How much breathing room would you have left each month? How might you cope with an unexpected expense? What could your finances look like when your initial mortgage deal ends?

Understanding those numbers can give you a much clearer picture than simply knowing the maximum amount you could potentially borrow.

Your first mortgage is just the starting point

The growing number of borrowers switching to interest-only mortgages reminds us that both mortgages and people's circumstances can change over time. Your first mortgage doesn't need to be the perfect mortgage for the next 30 years. It's about finding an option that suits you now, understanding what you can comfortably afford, and knowing there may be different options as your circumstances change.

Thinking about buying your first home? Speak to the team at First Time Buyer Mortgages. We can help you understand what you could borrow, what your repayments could look like and the mortgage options available to you.

Your home may be repossessed if you do not keep up with mortgage repayments.