Interest-only

Yes, we are getting more of these enquiries, but I would urge anyone tempted to switch to interest-only purely to dodge the payment jump to pause and think it through. Interest-only lowers the monthly cost because you stop repaying the actual loan, so the debt is still sitting there in full at the end of the term, and lenders will want to see a credible plan for how you clear it before they agree. For high earners with plenty of equity it can actually be a smart strategy, freeing up cash to invest or offset elsewhere while the property does the heavy lifting, which is exactly why most lenders reserve it for that profile. For everyone else coming off a cheap fix, a better first move is usually to talk to a broker about extending the term or going part repayment, part interest-only, which softens the blow without parking the whole balance. Treat interest-only as a bridge rather than a destination, and review it the moment your finances allow.

We’re definitely seeing more clients ask the question, but relatively few end up switching to full interest-only. More often, we find a better balance by extending the mortgage term or using part repayment, part interest-only. Interest-only should be a financial tool, not a financial trap. It can ease payment shock in the right circumstances, but you’re buying time, not reducing the debt. For higher-net-worth borrowers, it’s often used strategically rather than out of necessity—freeing up cash to invest elsewhere or improve liquidity while retaining flexibility. For everyone else, the priority should be making sure today’s payment relief doesn’t become tomorrow’s debt problem, with a clear plan to repay the capital.

I'm certainly seeing more enquiries about interest-only mortgages from clients coming to the end of ultra-low fixed rates, but in reality only a small proportion will actually be suitable for one.

An interest-only mortgage can reduce monthly payments, but it shouldn't be viewed as a quick fix for affordability. Borrowers need a credible repayment strategy and should fully understand that the mortgage balance will still need to be repaid at the end of the term.

My advice is always to look at the wider picture rather than focusing solely on reducing the monthly payment. In many cases there are other options worth considering first, such as reviewing the mortgage term, securing a more suitable product or adjusting the borrowing amount. Interest-only can be an excellent solution for the right client, but it should be chosen because it supports their long-term financial plans, not simply because it offers the lowest monthly payment.

We are not seeing a major shift towards interest-only mortgages simply because rates have increased. Most people still want the certainty of knowing their mortgage will be paid off at the end of the term, even if monthly payments have risen.

Ironically, our interest-only clients are often the ones least affected by higher rates. They could afford a repayment mortgage but choose interest-only as part of a wider financial strategy, keeping more money invested elsewhere.

For higher-rate taxpayers, paying into a pension can be far more rewarding than overpaying a mortgage. Paying off a 4% mortgage gives you a 4% saving, but pension contributions can receive tax relief worth around 66%, with even greater benefits for some people caught by the £100,000 tax trap. It is a higher-risk strategy, but for the right client it can leave them significantly better off.