The UK housing market saw a sharp uptick in activity during the first quarter of 2025, as buyers rushed to complete purchases before stamp duty changes came into effect on 1 April.

Figures published today by UK Finance show that both first-time buyer and homemover activity rose dramatically compared with the same period last year, contributing to a broader surge in mortgage lending.

According to the latest Household Finance Review, mortgage completions for first-time buyers rose 62% year-on-year in the first quarter, reaching 107,000 compared with 66,250 in Q1 2024. Homemover completions were up even more steeply, increasing by 74% to 94,450 over the same period. The surge was particularly pronounced in March, when completions by first-time buyers more than doubled compared with the same month in 2024, while homemovers recorded a 140% rise.

RATE LOCK-IN

Eric Leenders, managing director of personal finance at UK Finance, said the spike in activity was driven by the desire to lock in lower stamp duty rates ahead of the April changes. “We saw a significant rise in mortgage activity in the first quarter as households moved quickly to take advantage of lower Stamp Duty rates,” he said. “While these are signs of growing financial resilience, the challenges many households face, particularly around affordability, remain.”

Preliminary data from April indicates a natural cooling in transaction levels following the end of the tax incentive. Market observers suggest that while the deadline drove short-term demand, underlying affordability pressures remain a constraint on activity.

LONGER TERMS

The report notes that mortgage terms have continued to lengthen as buyers seek to manage affordability pressures. The average term for a first-time buyer mortgage now stands at 31 years, compared with 28 years a decade ago. This rise is being driven by increasing uptake of 40-year terms – typically the maximum offered by lenders – as borrowers look for ways to reduce monthly outgoings.

Despite some recent reductions in interest rates, affordability has not eased materially due to continued house price growth. First-time buyers are now spending a significant proportion of their income on mortgage payments, with many relying on longer terms to get on the ladder.

Toby Leek, president of NAEA Propertymark, said: “The increase in Stamp Duty thresholds sparked a flurry of mortgage lending in the first quarter of 2025 due to people rushing to avoid paying higher rates… While this has a positive effect on the mortgage market within the first quarter of the year, it was always inevitable there would be a post-threshold slowdown.”

The refinancing market was more subdued, with overall activity down 13% in the first quarter. This was largely attributed to fewer fixed-rate mortgages maturing during the early part of the year. Despite the decline, eight in 10 borrowers still opted for a product transfer with their existing lender, down slightly from 83% in the same period last year.

Looking ahead, UK Finance anticipates refinancing activity will pick up later in the year as more fixed-rate deals come to an end. Around 1.6 million fixed-rate mortgages are expected to expire during 2025, potentially creating renewed competition among lenders and opportunities for borrowers to switch to more favourable rates.

Household savings also rose during the first quarter, with total balances up 3% year-on-year. Deposits in notice accounts and cash ISAs increased by 10% and 11% respectively, reflecting a cautious shift among consumers amid ongoing economic uncertainty. Leenders said savers remained drawn to ISAs as a “reliable means to build and protect their savings,” even as debate continues over potential reforms.

While the early months of the year have brought a surge in market activity, the longer-term outlook remains uncertain. Much now depends on the trajectory of interest rates and the broader economic environment, with borrowers and lenders alike keeping a close eye on the Bank of England in the months ahead.