How Much is a £100k Interest-Only Mortgage Per Month in the UK?

Here’s a sobering fact: 22,000 UK households were past their interest-only mortgage maturity date as of late 2022, still owing the full balance with no clear way to repay it.

Over the last three years, we’ve purchased over 500 properties at Property Rescue, and around 60% of those purchases involved landlords exiting the market or owners whose interest-only mortgages were nearing expiry.

So we’ve seen first-hand what happens when interest-only terms end without a clear repayment plan.

And I can tell you, it’s not pretty.

In this guide, I’ll show you exactly how much a £100k interest-only mortgage costs per month at different interest rates (spoiler: £375-£583 in March 2026), explain what happens when the term ends, reveal why thousands of landlords are exiting the market right now, and share what we’ve learned from helping hundreds of people in this exact situation.

Whether you’re considering an interest-only mortgage, already have one, or you’re approaching the end of your term, this guide will help you understand exactly what you’re dealing with.

Let’s get into it.

What is an Interest-Only Mortgage?

An interest-only mortgage allows you to pay solely the interest portion each month, leaving the principal untouched.

Unlike repayment mortgages where you gradually reduce the balance, the full £100,000 remains owed at the end of the term.

Here’s the key difference:

Interest-only mortgage: You pay approximately £417/month at 5% interest. After 25 years, you’ve paid around £125,000 total, but you still owe the original £100,000.

Repayment mortgage: You pay £585/month at 5% interest. After 25 years, you’ve paid £175,500 total, and you owe nothing.

The appeal is obvious: lower monthly payments.

For buy-to-let investors in particular, reduced mortgage costs can translate to improved rental income profitability.

But there’s a catch, actually, quite a few catches, which we’ll get to.

First, let’s look at the actual numbers you’ll be paying.

How Much is a £100k Interest-Only Mortgage Per Month?

The calculation is straightforward:

Loan amount × annual interest rate ÷ 12 = monthly payment

Here are the monthly payments for a £100,000 interest-only mortgage at various rates:

As you can see, only a 1% difference in interest rate adds £83 per month to your repayments on a £100k loan.

And over 25 years, the difference between 4% and 7% is an extra £75,000 in interest payments, whilst you still owe the full £100,000 at the end.

But What Interest Rates Can You Actually Get in 2026?

The examples above cover the realistic range for March 2026.

Following four rate cuts in 2025, the Bank of England held the base rate at 3.75% in February 2026, with analysts anticipating further gradual cuts through the year.

As of March 2026, typical interest-only mortgage rates range from around 4.5% to 7.5%, depending on several factors:

Loan-to-value (LTV) ratio: The best rates are reserved for those with large deposits. Most lenders require a minimum 25% deposit for interest-only mortgages, but you’ll get the best rates with 40% or more.

Fixed vs. variable: Five-year fixed rates are currently around 4.5-5.5% with major lenders like Leeds Building Society. Variable rates tend to be higher, currently 7-8% for standard variable rates.

Your financial profile: Credit history, income level, employment type, and age all affect the rate you’re offered.

In practice, most people with good credit and 30-40% deposit will pay somewhere between 4.5% and 6% in the current market.

That’s £375 to £500 per month on a £100k loan.

Now, that might sound appealing compared to a repayment mortgage. But before you get too excited, let’s look at what you’re really signing up for.

Interest-Only vs. Repayment: The True Cost Comparison

Let’s compare the real numbers over a 25-year term at 5% interest:

The monthly saving is £168 with interest-only.

But that saving comes at a cost: you need to find £100,000 when the term ends.

Many borrowers who took out interest-only mortgages in the early 2000s assumed property prices would keep rising forever.

When their 25-year term comes due, they’re sometimes shocked to discover they still owe the full £100,000 (or £300,000, or whatever the original loan was) with no clear way to repay it.

That £168 monthly saving doesn’t look quite so attractive when you’re facing a £300,000 bill with no plan to pay it.

Which brings us to something the FCA has been warning about for years.

The Interest-Only ‘Mortgage Time Bomb’

Here’s something that doesn’t get talked about enough.

The FCA has flagged interest-only mortgages as a significant consumer risk. While earlier FCA research identified 2.6 million interest-only mortgages outstanding (with maturities spread over the following 30 years), more recent FCA analysis indicates fewer than 1 million interest-only and part-and-part mortgages remain outstanding, but many of these are now approaching maturity.

The FCA found that around 22,000 interest-only and part-and-part mortgages were past their maturity date as of late 2022, representing roughly 2.2% of the total. That might sound small, but for those 22,000 households, it’s a crisis.

What happens to those people?

They typically have four options:

1. Sell the property: often quickly, which is where companies like ours come in
2. Extend the mortgage term: if they’re young enough and the lender agrees
3. Switch to a repayment mortgage: if they can afford higher payments and qualify
4. Remortgage with a different lender: increasingly difficult for older borrowers

Borrowers who are 60 or 65 when their interest-only mortgage matures often can’t remortgage because lenders won’t extend terms past their late 70s.

For many, selling the property becomes the only realistic option.

The FCA is aware of this issue.

In their 2026 mortgage rule review, they announced they’re reviewing retirement interest-only requirements to make them more accessible, and exploring ways to improve advice to help people confidently plan for later life.

But for now, if you’re approaching the end of an interest-only term without a clear repayment strategy, you’re in a difficult position.

So what are your actual options when the term ends? Let’s be brutally honest about each one.

What Happens When Your Interest-Only Term Ends?

Option 1: Repay the Full Amount

If you’ve built up savings, investments, or a pension lump sum that covers the full mortgage balance, this is the ideal outcome.

You pay off the £100,000 (or whatever you owe), and the property is yours outright.

But in practice, this is rarer than you’d think.

Many people who took out interest-only mortgages in the early 2000s planned to use endowment policies or ISA investments to build up the repayment fund. When the 2008 financial crisis hit, many of those plans fell short.

Option 2: Can You Remortgage to Another Interest-Only Deal?

If your property has increased in value and you still have reasonable loan-to-value, you might be able to remortgage to another interest-only product.

Essentially, you’re kicking the can down the road for another 5-10 years.

But there’s a problem: most lenders won’t offer mortgages that extend past your late 70s.

So if you’re already 60 or 65, you’re running out of runway.

Option 3: Switch to a Repayment Mortgage

If you can afford higher monthly payments, you might be able to convert your interest-only mortgage to a repayment mortgage.

Using our earlier example, that means increasing your payment from £417/month to £585/month (at 5% interest).

That’s an extra £168 per month, or £2,016 per year.

Some people can absorb that increase. Many can’t, particularly if they’re retired or approaching retirement.

Option 4: Extend the Term

If you’re young enough, some lenders will allow you to extend your mortgage term.

This gives you more time to save up the repayment amount or improve your financial position.

But again, age is a limiting factor. Most lenders cap mortgage terms at age 75-80.

Option 5: What If You Need to Sell?

If none of the above options work, selling is often the only choice left.

And this is where we see people regularly at Property Rescue.

If you need to sell quickly, perhaps because the lender is threatening repossession, or you can’t afford to wait months for a traditional sale, a cash buyer can exchange in as little as 7 days.

We’ve completed over 500 property purchases in the last three years, with an average completion time of 28 days.

For someone facing an expiring interest-only mortgage with no other options, that speed can be a lifeline.

Not a landlord? Skip ahead to the next section on getting an interest-only mortgage in 2026.

Now, if you’re a landlord or considering becoming one, this next section is critical. The rules have changed dramatically in recent years, and many landlords are discovering their interest-only mortgages no longer make financial sense.

Why Landlords Love (and Are Leaving) Interest-Only Mortgages

A significant proportion of property sales to cash buyers currently involve landlords exiting the market.

And many of them are sitting on interest-only mortgages.

Here’s why landlords traditionally favoured interest-only:

Better cash flow: Lower monthly payments mean more profit from rental income.

Tax efficiency (historically): Interest payments used to be fully deductible against rental income for tax purposes.

Leverage: Landlords could borrow more and build larger portfolios with the same monthly budget.

So why are they leaving now?

Two things have changed dramatically:

Section 24 Tax Changes

This is the big one.

Since April 2020, individual landlords can no longer deduct mortgage interest from rental income before calculating tax. (This restriction doesn’t apply to landlords operating through a limited company, who can still deduct mortgage interest as a business expense.)

Instead, they get a 20% tax credit on interest payments.

For higher-rate taxpayers, this is devastating.

Suddenly, that interest-only mortgage that was reducing taxable rental income is only giving you a 20% credit, whilst your rental income is taxed at 40% (or 45% for additional-rate taxpayers) in England, Wales, and Northern Ireland. Scottish landlords face different rates: 42% (Higher), 45% (Advanced), or 48% (Top rate).

There’s also an indirect but significant knock-on effect for CGT. Because mortgage interest can no longer be deducted from rental income before tax calculation, it can push a landlord’s taxable income from basic-rate (20%) into higher-rate (40%) territory. Since residential property CGT rates depend on your income tax band, this means some basic-rate landlords end up paying CGT at 24% instead of 18% when they sell, an unexpected consequence of a change that was supposed to only affect income tax.

The Great Landlord Exit

The combination of Section 24, increased regulation, higher interest rates, and general market uncertainty has triggered a mass landlord exodus.

HMRC data shows a 33% surge in CGT liabilities reported through the CGT on UK Property service in a single year. HMRC attributed this partly to the CGT rate reduction (from 28% to 24%) encouraging more disposals, combined with the reduced annual exempt amount, though many industry commentators believe increased landlord exits were also a significant factor.

The property market is currently very price-sensitive and buyer-dominated, with a glut of flats in London due to landlords exiting.

Many of these landlords are being squeezed by Section 24 tax changes on top of their interest-only mortgage commitments.

When you combine higher monthly mortgage costs (due to rate rises) with worse tax treatment and increased regulatory burden, the numbers simply stop working for many landlords.

That’s why we’re seeing so many landlords selling up, often quickly, to avoid another year of losses.

So after all that, you might be wondering: should anyone actually get an interest-only mortgage? And if so, how do you qualify? Let’s tackle both questions.

How to Get an Interest-Only Mortgage in 2026

Interest-only mortgages are much harder to get than they were before 2008.

Here’s what lenders typically require:

Minimum Deposit: 25-40%

Most lenders require a minimum deposit of 25% for interest-only mortgages, though the best rates are reserved for those with 40% or more.

This immediately rules out first-time buyers and anyone with limited equity.

Credible Repayment Strategy

Here’s where lenders get really strict.

The FCA requires lenders to verify that you have a credible plan to repay the capital at the end of the term.

Acceptable repayment strategies include:

• Regular ISA or stocks and shares investments: with evidence you’re contributing enough to reach the target
• Expected pension lump sum: with pension statements showing projected value
• Sale of another property: particularly common for buy-to-let
• Sale of the mortgaged property (downsizing): a standard repayment strategy for both buy-to-let and residential mortgages, provided you have sufficient equity
• Expected inheritance: the FCA considers reliance on uncertain inheritance potentially non-compliant (MCOB 11.6.46), so most lenders will not accept this as a primary strategy
• Later conversion to repayment mortgage: a possible future option with some lenders, but not a standard acceptable repayment strategy at application stage; subject to later affordability checks

Lenders will want to see evidence of your repayment strategy before approving an interest-only mortgage.

And they’re much stricter about this than they were pre-2008.

A vague plan to “sell some shares” or “use my pension” won’t cut it anymore. You need documentation.

Affordability Assessment

Even though your monthly payments are lower with interest-only, lenders still assess affordability strictly.

They’ll look at your income, existing debts, and living costs to ensure you can comfortably afford the payments, and still save towards the eventual repayment.

Age Restrictions

Most lenders won’t offer mortgages that extend past age 75-80.

So if you’re 55 and want a 25-year interest-only mortgage, you might struggle to find a lender willing to approve it.

This is a particular issue for older borrowers who want to downsize onto an interest-only product, or remortgage an existing interest-only deal.

Given all these restrictions, you might be thinking interest-only mortgages are always a bad idea. Not quite.

When Does Interest-Only Make Sense?

Interest-only can make sense in specific situations:

Buy-to-let investors with strong cash flow: If you’re an experienced landlord with multiple properties, good rental yields, and a clear strategy to repay capital (e.g., selling properties to repay mortgages), interest-only can be a legitimate wealth-building tool.

High earners with disciplined savings: If you earn significantly more than your mortgage costs and are disciplined about investing the difference between interest-only and repayment payments, you might accumulate more wealth this way (though most people aren’t this disciplined).

Short-term property developers: If you’re buying a property to renovate and sell within 1-2 years, interest-only keeps costs down during the development period.

People with large expected windfalls: If you’re genuinely expecting a significant inheritance, business sale, or other major payment that will comfortably cover the mortgage, interest-only might work.

But for most residential borrowers, particularly first-time buyers or those planning to live in the property long-term, a repayment mortgage is almost always the safer choice.

Yes, the monthly payments are higher.

But you’re building equity every month, reducing your debt, and you’re not facing a six-figure bill when the term ends.

That’s the theory, anyway. Here’s what we’ve seen in practice from working with hundreds of interest-only mortgage holders.

Common Patterns Among Interest-Only Mortgage Holders

There are clear patterns among borrowers who run into trouble with interest-only mortgages.

Some of these might surprise you:

Age is the killer: Most people in difficulty are 60+ when their term matures and can’t remortgage due to age restrictions.

Property value assumptions don’t always hold: Many people assumed their property would increase enough in value to easily repay the mortgage. When values stagnate or fall (particularly after 2008), this plan collapses.

Repayment strategies often fail: ISA investments underperform, endowment policies fall short, pension values are lower than expected, inheritances are spent on care home fees before they materialise.

Market timing matters: People whose terms matured in 2020-2022 when interest rates were low could often remortgage. Those facing maturity in 2023-2026 during the rate spike face much worse options.

Speed becomes critical: When you’re facing an expiring interest-only term with no repayment plan, you can’t afford to wait 4-6 months for a traditional estate agent sale. That’s where cash buyers become valuable.

When you factor in estate agent fees (around 1.5%), repair costs, and continued mortgage payments during a lengthy sale process, the net proceeds from an open-market sale often end up around 90-95% of the asking price. That narrows the gap with a cash offer considerably, making the speed and certainty of a cash sale more attractive than the headline difference suggests.

So where does all this leave you?

The Bottom Line

A £100k interest-only mortgage costs between £375 and £583 per month in March 2026, depending on your interest rate and circumstances.

That’s significantly less than a repayment mortgage, roughly £168/month cheaper at typical rates.

But that saving comes with a significant catch: you must repay the full £100,000 when the term ends.

Many property sales in the current market involve landlords exiting or owners with interest-only mortgages nearing expiry, and a significant number don’t have a clear repayment plan in place.

The FCA has identified interest-only mortgage maturity as a significant consumer risk, with tens of thousands of borrowers approaching the end of their terms without adequate repayment strategies.

If you’re considering an interest-only mortgage, make absolutely certain you have a credible, documented plan to repay the capital.

Lenders will check, and you’ll be grateful for that discipline when the term ends.

And if you’re already sitting on an interest-only mortgage that’s approaching maturity without a clear repayment strategy? Start planning now. Not next month. Not next year. Now.

Because your options get more limited the closer you get to the deadline, and the last thing you want is to be forced into a rushed decision when you have a six-figure balance due and nowhere to turn.