Borrowing for home purchases noticed progress in Q3 following the surge and slowdown round Stamp Obligation adjustments earlier within the 12 months. Lending is now across the secure ranges seen in 2022, regardless of materials affordability challenges. Ahead‑trying information recommend progress continued into October earlier than flattening in November.
After a sluggish begin to the 12 months, refinancing exercise confirmed an uplift, with 557,000 loans superior in Q3 – up 48 per cent on the identical quarter of 2024. Inside product transfers continued to account for almost all of refinancing, reflecting prospects’ desire for ease and velocity when rolling off fastened‑fee offers.
Affordability and mortgage market entry
Affordability stays very tight, with first‑time consumers nonetheless paying round 22 per cent of gross family revenue on month-to-month mortgage funds – the best share for practically twenty years.
The Monetary Conduct Authority’s (FCA) latest Mortgage Rule Evaluate has opened debate on whether or not lending guidelines may very well be adjusted to help wider homeownership. Whereas the present guidelines have helped maintain arrears low, they’ve additionally restricted entry for some teams. Curiosity‑solely lending, for instance, has fallen from greater than 1 / 4 of latest loans in 2005 to only one per cent right now, and lending to self‑employed debtors has dropped from 15 per cent to underneath 9 per cent. These shifts present how regulation has reshaped the market but in addition spotlight the place entry has narrowed.
On the similar time, extra debtors are stretching mortgage phrases to handle affordability, resulting in an increase in greater mortgage‑to‑revenue borrowing. The Monetary Coverage Committee’s cap has stored this in verify, however a modest rest earlier this 12 months has supported extra lending at greater LTIs, significantly to first‑time consumers, with 11 per cent extra FTB loans via Q3 than in the identical interval of 2024.
The FCA’s overview raises essential questions on how guidelines may very well be tailored to widen entry responsibly. Rigorously thought-about adjustments, significantly round curiosity‑solely lending, might assist underserved teams such because the self‑employed, whereas sustaining safeguards that defend each households and the broader market.
Family financial savings
Financial savings continued to develop however at a slower fee, with deposits in discover accounts and money ISAs nonetheless up by ten per cent or extra via the quarter. Extra households reported precautionary saving in opposition to an unsure financial backdrop, at the same time as actual wage progress softened and financial savings charges drifted decrease. On the finish of September, households held £295 billion in discover accounts and £207 billion in money ISAs, respectively ten and 14 per cent greater than a 12 months earlier.
Eric Leenders, MD of non-public finance at UK Finance, mentioned: “Mortgage lending returned to progress within the third quarter after a quieter begin to the 12 months, whereas refinancing additionally elevated as extra prospects rolled off fastened‑fee offers. Affordability stays tight, however latest regulatory changes are serving to widen entry on the margins, and the FCA’s overview raises essential questions on how guidelines may very well be tailored to help underserved teams such because the self‑employed.
“Financial savings progress has moderated however stays sturdy by historic requirements, with households persevering with to construct precautionary buffers in opposition to an unsure financial backdrop forward of the Autumn Funds.”
