Mortgage lending edged up in the second quarter of 2025 despite a sharp fall in gross advances, according to the latest data from the Financial Conduct Authority.
The total value of outstanding residential mortgage loans rose by 0.3% on the quarter to £1.7 trillion, up 2.6% on the year. But gross advances fell by 24.2% to £58.8 billion – their lowest level since the first quarter of 2024 – and 2.4% lower than the same period last year.
New mortgage commitments, a leading indicator of lending to come, rose sharply by 14.6% from the previous quarter to £78.2 billion, the strongest figure since late 2022 and up 16.8% on the year.
Industry reaction to the figures highlighted both resilience and risk. Richard Pike, chief sales and marketing officer at Phoebus, said the data “paints a broadly positive picture” with arrears now at multi-year lows.
He added: “The growth in remortgage activity reflects borrowers’ focus on securing the best possible deals in a volatile rate environment. Taken together, the data suggests a market that is steadying, with both lenders and borrowers adapting well to challenging conditions.”
Karen Noye, mortgage spokesperson at Quilter, pointed to the impact of April’s stamp duty changes, which she said had caused activity to slump after a rush of purchases earlier in the year. “With interest rates still high and stamp duty costs inflated, it came as no real surprise that there was such a downward shift in the months that followed,” she said.
Noye noted that new commitments were at their highest in nearly three years, with high loan-to-value lending at 7.1%, the strongest since 2008, as lenders sought to attract buyers with smaller deposits. She added that arrears were at their lowest since 2022, but warned that affordability and supply constraints meant the housing market faced a “difficult winter”.
Richard Pinch, senior director, risk, at Broadstone, described the figures as “reassuring” with arrears falling to their lowest since 2023. He said the recent Bank of England rate cut should benefit borrowers but warned that the Autumn Budget could introduce new property-related taxes, while higher living costs and a fragile jobs market still posed risks.
Martyn Smith, chief executive of Black & White Bridging, said the data showed “increasing buyer confidence” despite the fall in gross advances.
“New mortgage commitments and remortgages are on the up, a clear sign of increased borrower activity, likely spurred on by the recent base rate cut,” he said.
But he cautioned that lenders would need to remain flexible to support borrowers with smaller deposits until inflation and interest rates were more settled.
The FCA’s statistics suggest the mortgage market is at a turning point – with household finances stabilising, lenders showing more appetite for higher-risk loans, but ongoing uncertainty over tax and interest rates still weighing on the outlook.
