Mortgage lending activity returned to growth in Q3, following a quieter second quarter caused by many transactions having been brought forward ahead of stamp duty changes in April, the latest UK Finance data shows.
Refinancing also increased, with volumes up nearly 50% year‑on‑year as more customers rolled off fixed rate deals.
Purchase lending is now around the stable levels seen in 2022, despite material affordability challenges. Forward‑looking data suggests growth continued into October before flattening in November.
After a slow start to the year, refinancing activity showed an uplift, with 557,000 loans advanced in Q3 – up 48% on the same quarter of 2024. Internal product transfers continued to account for the majority of refinancing, reflecting customers’ preference for ease and speed when rolling off fixed rate deals.
Affordability and mortgage market access
Affordability remains very tight, with first‑time buyers still paying around 22% of gross household income on monthly mortgage payments – the highest share for nearly two decades.
The FCA's recent Mortgage Rule Review has opened debate on whether lending rules could be adjusted to support wider homeownership. While the current rules have helped keep arrears low, UK Finance says they have also limited access for some groups.
Interest‑only lending, for example, has fallen from more than a quarter of new loans in 2005 to just 1% today, and lending to self‑employed borrowers has dropped from 15% to under 9%. These shifts show how regulation has reshaped the market but also highlight where access has narrowed.
At the same time, more borrowers are stretching loan terms to manage affordability, leading to a rise in higher loan‑to‑income borrowing. The Financial Policy Committee’s cap has kept this in check, but a modest relaxation earlier this year has supported more lending at higher LTIs, particularly to first‑time buyers, with 11% more FTB loans through Q3 than in the same period of 2024.
Eric Leenders, managing director of personal finance at UK Finance, said: “Mortgage lending returned to growth in the third quarter after a quieter start to the year, while refinancing also increased as more customers rolled off fixed‑rate deals. Affordability remains tight, but recent regulatory adjustments are helping widen access at the margins, and the FCA’s review raises important questions about how rules could be adapted to support underserved groups such as the self‑employed."
Mary-Lou Press, president of NAEA Propertymark, commented: “While mortgage activity has picked up, the market remains finely balanced. The return to growth in lending and the sharp rise in refinancing are welcome signs of renewed confidence, but affordability pressures continue to hold many prospective buyers back, particularly first-time buyers, who are now committing the highest share of their income to mortgage payments in nearly twenty years.
“Many agents are still seeing buyers stretch loan terms or rely on higher loan-to-income ratios simply to enter the market; therefore, it would be a welcome step to see regulatory change matched with a long-term plan to increase housing supply and genuinely improve affordability.
“Households continue to save cautiously amid economic uncertainty, reminding us that confidence remains fragile. We hope that policymakers focus on reforms that support accessible and sustainable homeownership.”
