Last reviewed: June 2026
TL;DR- Interest only mortgages taken before the 2014 Mortgage Market Review are maturing with many borrowers unable to repay the capital.
- Options include: switching to a repayment mortgage, extending the term, remortgaging to a RIO, switching to equity release, or selling the property.
- FCA rules require lenders to contact borrowers well in advance of maturity and offer forbearance before repossession is considered.
- The FOS has upheld complaints from borrowers mis-sold interest only mortgages without adequate explanation of the repayment vehicle requirement.
The Interest Only Maturity Problem
Hundreds of thousands of interest only mortgages were sold in the UK before the 2014 Mortgage Market Review tightened eligibility criteria. Many borrowers were sold these products without a credible repayment strategy, relying on property price growth, hoped-for windfalls or endowment policies that underperformed. As these mortgages reach their term end, borrowers must repay the outstanding capital in full - a sum they may not have.
The FCA has described this as one of the most significant conduct issues in the UK mortgage market and requires lenders to have proactive strategies for contacting and supporting at-risk borrowers before maturity.
Options at Maturity
Borrowers whose interest only mortgage is approaching maturity have several options, depending on their income, equity position and age:
- Switch to repayment: if income supports a repayment mortgage on the outstanding balance, the term can be extended and the mortgage converted to repayment. The monthly payment will increase.
- Extend the interest only term: some lenders agree to extend the interest only period to give borrowers more time to arrange a repayment strategy, subject to FCA affordability requirements.
- Remortgage to a RIO: a retirement interest only mortgage requires only monthly interest payments and has no defined end date - this may suit retired borrowers with adequate pension income.
- Switch to equity release: a lifetime mortgage replaces the maturing interest only mortgage, with no monthly payment required. Interest rolls up, eroding equity over time.
- Sell the property: the sale proceeds repay the mortgage and any remaining equity passes to the borrower. Downsizing is a common outcome for interest only mortgage holders who have built up equity through property price appreciation.
FCA Requirements on Lenders
FCA rules under MCOB require lenders to contact interest only borrowers well in advance of maturity - at least five years before for mortgages approaching the risk threshold - to alert them to the maturity date and explore options. Lenders must treat customers in financial difficulty fairly and consider all forbearance options before initiating possession proceedings. Repossession is a last resort under FCA conduct rules.
Frequently Asked Questions
What if my lender demands repayment of my interest only mortgage and I can't pay?
Lenders are required by FCA rules to engage with borrowers and explore all options before initiating possession proceedings. If a lender is acting in a way that appears inconsistent with these requirements, a complaint can be made to the lender's complaints department and, if unresolved, to the Financial Ombudsman Service. Borrowers facing this situation should seek specialist mortgage and debt advice immediately.
Can I complain if I was mis-sold an interest only mortgage?
Yes. The FOS has upheld complaints from borrowers who were sold interest only mortgages without adequate explanation of the repayment vehicle requirement, particularly endowment mortgages sold before 2000. If the borrower was not told about the need for a separate repayment strategy or was given misleading information about the repayment vehicle, a complaint to the FOS may be appropriate. Time limits apply to complaints - the FOS should be contacted for current guidance.
Is a sale-and-rent-back scheme a good option?
Sale-and-rent-back involves selling the property to a company and renting it back, typically below market rent for a defined period. The FCA regulates this activity. Sale-and-rent-back is generally considered a last resort as the sale price is below market value and tenancy security is limited. The FCA's guidance on sale-and-rent-back schemes should be reviewed carefully, and independent legal and financial advice taken, before considering this option.
What happens if I have equity in the property at maturity?
If the property has increased in value and there is significant equity above the outstanding mortgage, the most straightforward resolution is to sell the property, repay the mortgage from the proceeds and either purchase a smaller property outright or with a smaller mortgage, or move to rented accommodation. Downsizing releases the equity trapped in the property and eliminates the mortgage obligation. A RIO or lifetime mortgage could alternatively be used to refinance the existing interest only balance without requiring a sale.
