Interest-only and part-interest-only mortgage levels have halved since 2015, with just under a million now left outstanding in the UK, new analysis by the Financial Conduct Authority (FCA) has indicated.

The regulator suggested the fall is a result of borrowers moving in greater numbers onto repayment loans or repaying earlier than expected.

Figures published by the FCA have shown there are 750,000 interest-only mortgages and 245,000 part-interest-only mortgages remaining among UK homeowners. Of these, the greatest number of interest-only mortgages are set to mature in 2031 (72,000) and 2032 (77,000), with a smaller peak in 2027. This means borrowers without a repayment plan still have time to act and reduce at least some of their outstanding capital by the end of their mortgage.

Consumer research commissioned by the FCA also found that the majority of borrowers (78%) were aware of needing to have a repayment plan in place when they took out the mortgage.

This research also showed that 82% of borrowers were confident in their ability to repay the outstanding capital at the end of the mortgage term. However, the findings suggested this may be overly optimistic – while 36% of borrowers expected some shortfall, modelling suggests this could be closer to 46%.

“Whilst it is encouraging to see the number of interest-only mortgages reducing faster than expected, with the majority of loans being paid off or transferred to other products, the challenge remains for a significant number of borrowers,” said director of retail banking at the FCA, David Geale.

“Taking an interest-only mortgage can mean lower monthly payments, but borrowers need a plan to repay the outstanding balance when the mortgage comes to an end. If you have an interest-only mortgage and are unsure if your current plan is sufficient, speak to your lender as soon as possible, to discuss your options.”

The FCA confirmed it will now be engaging with industry and consumer groups to discuss the research findings and how lenders can further support borrowers who may not be able to repay all the capital owed at the end of their mortgage term.

With the regulator’s Consumer Duty now in effect, it will review its existing guidance on the fair treatment of interest-only borrowers to ensure this is in line with the higher standards set by the new rules.

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