On £200,000 at 5%, an interest only mortgage costs £833 a month against £1,074 on repayment over 30 years, and the £200,000 is still owed at the end. Work out yours, and what it takes to save it.
At 5%, today’s lowest 2-year fixed rate for a 75% loan from the 11 lenders NewHomeSearch reads, held for the whole term, against repayment over 30 years. On interest only the whole loan is still owed at the end.
| Loan | Interest only | Repayment | More interest |
|---|---|---|---|
| £100,000 | £417 a month | £537 a month | £56,744 |
| £150,000 | £625 a month | £805 a month | £85,116 |
| £200,000 | £833 a month | £1,074 a month | £113,488 |
| £250,000 | £1,042 a month | £1,342 a month | £141,861 |
| £300,000 | £1,250 a month | £1,610 a month | £170,233 |
| £350,000 | £1,458 a month | £1,879 a month | £198,605 |
| £400,000 | £1,667 a month | £2,147 a month | £226,977 |
| £450,000 | £1,875 a month | £2,416 a month | £255,349 |
| £500,000 | £2,083 a month | £2,684 a month | £283,721 |
Interest only on £200,000 leaves the £200,000 to repay. Saving it month by month, against repayment at 5% (£1,074 a month), if savings grew at each rate below: an illustration, never a forecast. Only savings growing faster than the mortgage’s rate make interest only and saving cost less than repayment.
| Savings grow at | Save a month | With the payment | Against repayment |
|---|---|---|---|
| No growth | £556 | £1,389 | £315 more |
| 2% a year | £406 | £1,239 | £166 more |
| 4% a year | £288 | £1,122 | £48 more |
| 6% a year | £199 | £1,032 | £41 less |
| 8% a year | £134 | £968 | £106 less |
Part of the loan on interest only, the rest on repayment: on £200,000 at 5% over 30 years.
| On interest only | Payment | Owed at the end | Interest |
|---|---|---|---|
| 25% of the loan | £1,014 a month | £50,000 | £214,884 |
| 50% of the loan | £953 a month | £100,000 | £243,256 |
| 75% of the loan | £893 a month | £150,000 | £271,628 |
A year’s interest on the loan, by the month: £200,000 at 5% is £833 a month. None of it repays the loan, so it stays the same while the rate does.
Payment = loan × rate ÷ 12
The whole loan is due. It is repaid from savings or investments built up for it, by selling the home, or with a new mortgage if a lender agrees. Before lending on interest only, a lender must have evidence that you will have “a clearly understood and credible repayment strategy” (the FCA’s rule MCOB 11.6.41R). The FCA Handbook, MCOB 11.6.41R
At 5%, £833 a month: a year’s interest on £200,000, by the month. On repayment over 30 years it would be £1,074, and the £200,000 is still owed at the end of an interest-only term.
At 5%, £1,250 a month: a year’s interest on £300,000, by the month. On repayment over 30 years it would be £1,610, and the £300,000 is still owed at the end of an interest-only term.
Multiply the loan by the yearly rate and divide by 12 (Payment = loan × rate ÷ 12): £200,000 at 5% is £833 a month. None of it repays the loan, so the payment never falls while the rate stays the same.
Each month, yes: £833 against £1,074 on £200,000 over 30 years. Over the term, no: interest only pays £300,000 of interest against £186,512, and still owes the £200,000.
To have £200,000 in 30 years, £556 a month with no growth, or £288 if savings grew at 4% a year. With the interest-only payment that costs more each month than repayment unless the savings grow faster than the mortgage’s 5%.
The whole loan is due. It is repaid from savings or investments built up for it, by selling the home, or with a new mortgage if a lender agrees. Plan how it will be repaid from the start: the calculator works out the monthly saving it takes.
Part of the loan is on interest only and the rest on repayment. With half of £200,000 on each, at 5% over 30 years, the payment is £953 a month, and £100,000 is still owed at the end.
A lender must see how you will repay the loan before it lends on interest only: the FCA’s rule MCOB 11.6.41R asks for evidence that you will have “a clearly understood and credible repayment strategy”. The FCA consulted in June 2026 (CP26/18) on easing this where only part of the loan is on interest only. Each lender sets its own criteria on top, such as the most it lends against the home’s worth.