UK mortgage lending surged within the third quarter of 2025 as elevated purchaser demand and bettering market sentiment pushed exercise to its highest stage in years, new figures from the Financial institution of England present.
The Financial institution’s newest Mortgage Lenders and Directors Statistics reported a pointy rebound throughout the market, with gross mortgage advances leaping 36.9% to £80.4bn – the strongest quarterly rise since 2020. The upturn displays renewed momentum within the housing market following a subdued begin to the yr.
Excellent residential mortgage balances rose 0.9% over the quarter to £1,73trn , standing 2.9% increased than a yr earlier. New mortgage commitments additionally strengthened, rising 1.6% to £79.4bn, the best stage since Q3 2022 and up 20.3% year-on-year.
Greater-risk lending additionally grew. Excessive loan-to-value advances (above 90% LTV) edged as much as 7.4% of recent lending — the best share since mid-2008 and 0.8% above final yr. Lending to debtors with increased loan-to-income ratios climbed 3.3% to 44.7%, the biggest quarterly improve since Q3 2020, though nonetheless barely beneath the extent recorded a yr earlier.
The figures level to a broad-based rise in mortgage exercise, with development spanning each mainstream and higher-risk segments of the market.
Proprietor-occupier buy exercise continued to strengthen within the quarter. Home buy loans made up 58.6% of gross advances, an increase of two.5 proportion factors on the earlier quarter, although nonetheless 5.8 proportion factors beneath the extent recorded a yr earlier. Remortgaging for owner-occupation dipped barely, down 0.4 proportion factors to twenty-eight.6%, however remained 5.8 proportion factors increased than a yr in the past.
Mortgage efficiency additionally confirmed indicators of enchancment. Excellent balances in arrears fell 2.9% to £20.6bn and had been 5.8% decrease than a yr earlier. The share of complete mortgage balances in arrears held regular at 1.2%, down 0.1 proportion factors year-on-year. New arrears circumstances accounted for 8.8% of all arrears balances, a marginal quarterly decline of 0.1 proportion factors and the bottom stage for the reason that first quarter of 2022.
Richard Pike, chief gross sales and advertising and marketing officer at Phoebus Software program, stated: “These figures reveal the mortgage market was in impolite well being over the summer time, with general lending up for the seventh consecutive quarter.
“Gross advances noticed the biggest quarterly improve for 5 years as debtors took benefit of falling charges following the Financial institution of England’s base charge lower in August. New mortgage commitments had been additionally at their highest since Q3 2020, exhibiting a powerful pipeline for lenders for the remainder of the yr.
He added: “Just below half of this lending [44.7%] was to debtors with excessive loan-to-income ratio as mortgage corporations supply extra low deposit merchandise. That is opening the potential for residence possession to extra individuals and stimulating market exercise however comes with increased danger. The truth that arrears charges are persevering with to fall means that lenders are getting the steadiness proper right here, and demonstrates the resilience of households within the face of cost-of-living pressures.
“Will probably be fascinating to see subsequent quarter’s figures after we’ll see how the uncertainty main as much as the Finances affected borrower behaviour.”
Simon Gammon, managing accomplice, Knight Frank Finance, commented: “Mortgage lending knowledge has been risky via 2025. The second quarter was unusually weak as patrons introduced ahead purchases to keep away from adjustments to stamp responsibility thresholds on April 1st, so the 36.9% quarterly rise in gross mortgage advances is the market reverting again to development. That stated, £80bn in advances represents a exceptional show of resilience given the fiscal and financial uncertainties that debtors confronted in the course of the three months via September.
“The worth of recent mortgage commitments surged by greater than a fifth year-on-year. Debtors can now entry fastened charges as little as 3.55%, and whereas that’s fairly a bit increased than earlier than the pandemic, mortgage charges have settled at a stage that patrons are clearly snug with. Ought to inflation knowledge proceed to maneuver in the proper route, lenders will preserve trimming charges and we should always see a busier spring promoting season in 2026.”
