Interest-only mortgages can dramatically reduce your monthly payments — but they come with serious risks. Here's everything you need to know before considering one in 2026. Updated April 2026

Interest-Only vs Repayment: Monthly Cost Comparison

These calculations illustrate the monthly payment difference only — the critical point is that with interest-only, the full loan balance remains outstanding at the end of the term.

Who Can Get an Interest-Only Mortgage in 2026?

Interest-only mortgages became far more restricted after the 2008 financial crisis, when millions of borrowers reached the end of their terms with no repayment plan. In 2026, lenders apply strict criteria:

Accepted Repayment Strategies

Lenders require a credible plan to repay the capital at the end of the term. Accepted strategies typically include: sale of the mortgaged property (most common for buy-to-let); sale of another property; endowment policy or investment portfolio; pension lump sum; or ISA savings.

Lenders will want evidence that your strategy is on track. Vague plans are not accepted — you need documented investment statements or pension projections.

The Interest-Only Mortgage Time Bomb

The FCA has warned repeatedly about the 'interest-only mortgage time bomb' — around 150,000 interest-only mortgages are estimated to have no repayment plan in place. If you have an interest-only mortgage and are unsure how you'll repay the capital, contact your lender immediately and seek advice from a qualified mortgage adviser.

This article is for informational purposes only and does not constitute financial advice. Mortgage rates change daily. Always consult a qualified mortgage broker before making decisions. Your home may be repossessed if you do not keep up repayments.