The total value of outstanding UK residential mortgage lending reached a record level in the final quarter of 2025 according to latest figures from the Bank of England.
Data from the Bank’s Mortgage Lenders and Administrators Statistics (MLAR) shows the stock of residential mortgage loans rose by 0.8% quarter-on-quarter to £1.734 trillion in Q4 2025, the highest level since records began in 2007. The total was also 3.0% higher than a year earlier.
While the overall stock of lending continued to grow, the flow of new lending slowed during the quarter. Gross mortgage advances fell by 1.3% to £79.4bn, although they remained 15.4% higher than the same period a year earlier.
Meanwhile, new mortgage commitments, which indicate lending likely to complete in the coming months, declined by 11.9% to £69.9bn, marking the largest quarterly drop since Q3 2023. Despite the fall, commitments were still 0.8% higher year-on-year.
HIGHER RISK LENDING
The share of mortgage advances with loan-to-value (LTV) ratios above 90% increased by 0.9 percentage points to 8.3%, the highest level since Q2 2008.
Similarly, the proportion of lending to borrowers with high loan-to-income (LTI) ratios rose to 46.5%, up 1.7 percentage points on the previous quarter and the highest level since late 2022.
OWNER OCCUPIERS
Mortgages for house purchase accounted for 61.6% of gross advances, up 3.0 percentage points quarter-on-quarter, while the share of remortgaging fell to 25.4%, down 3.1 percentage points.
Buy-to-let lending saw a marginal increase, with its share of advances rising slightly to 8.4%.
MORTGAGE ARREARS
The value of outstanding balances in arrears fell by 0.9% to £20.4bn, the lowest level since Q3 2023 and 5.3% lower than a year earlier.
Overall, 1.2% of total mortgage balances were in arrears, unchanged from the previous quarter but slightly lower than the same period last year.
However, the proportion of arrears classified as new cases rose to 9.4%, representing the first quarterly increase since Q2 2023.
FIRST-TIME BUYER HEADACHE
Jo Carrasco (main picture, inset), business partnerships director of Stonebridge, said: “The Budget created a headache for buyers last autumn, and this is the moment it really comes out in the figures.
“Growth in new advances ground to a halt, but it’s important to remember they were still more than 15% higher than a year earlier after the largest rise in mortgage advances for five years in the previous quarter. This was something no one expected would be repeated.
“It’s in the approvals figures that we see the big change this time.”
“It’s in the approvals figures that we see the big change this time and, of course, all fingers are pointing at the nervousness surrounding the November Budget, with rumours swirling of hefty tax rises. Buyers simply took their foot off the gas and bided their time.
“We saw a strong rebound in December once the budgetary uncertainty was out of the way, and we’ll see how housing market activity shapes up in the first half of this year, given the interest rate uncertainty created by conflict in the Middle East.”
BUDGET UNCERTAINTY
Richard Pike, chief sales and marketing officer at Phoebus, added: “There’s no doubt the uncertainty in the run-up to the November budget was a contributory factor to the mortgage market slowing down in the final quarter of the year.
“A large number of households put their plans on hold in anticipation of what was going to be announced by Rachel Reeves, which we can see in the latest set of figures from the Bank of England.
“While the base rate reduction in December re-established momentum in the market, it wasn’t enough to deliver a meaningful increase by the end of the year.
“The welcome news from these figures is that arrears rates continue to fall, showing that households are managing their finances.
“The warning sign for lenders will be if this figure starts to rise, and then servicing teams will need to be ready to support customers who may be in financial difficulty.”
PENT-UP DEMAND
Karen Noye, mortgage expert at Quilter, said: “The Q4 lending figures capture a market that was beginning to thaw as affordability slowly improved.
“Borrowers who had spent much of 2024 sitting on the sidelines were cautiously re‑entering the market, which helps explain the rise in high loan to value (LTV) lending to 8.3%, the highest since 2008, and the increase in high LTI borrowing to 46.5%. These were signs of pent‑up demand returning rather than speculative behaviour.
“The shift in the mix of lending reinforces that picture.”
“The shift in the mix of lending reinforces that picture. The share of lending for house purchase rose by 3 percentage points, the biggest quarterly jump since 2024, while remortgaging fell by a similar amount.
“That pattern typically reflects buyers taking advantage of a period where rates have stabilised and affordability has eased just enough to make transactions possible again. Gross advances decreased marginally but are still more than 15% higher than a year earlier, which fits that same narrative.”
STEADIER FOOTING
And she added: “Arrears data also pointed to a market on steadier footing. Outstanding balances with arrears fell to their lowest level since 2023, and the overall arrears share held at 1.2%. That stability was giving lenders confidence to support higher LTV and higher LTI segments without broadening risk too aggressively.
“The challenge is that this gradual improvement in affordability was predicated on falling swap rates and an expectation of rate cuts through early 2026. The US–Iran conflict has unsettled that trajectory. Higher oil prices and market volatility have pushed swaps up again, prompting lenders to pause or reverse planned reductions.
“The timing is unhelpful.”
“This is likely to affect exactly the groups who had been returning to the market. For first‑time buyers, even a small rise in pricing can wipe out the marginal affordability gains that made Q4 activity possible. High LTV borrowing, which had finally recovered, is particularly vulnerable to tightening or repricing.
“For those remortgaging, the timing is also unhelpful. Many households were expecting the spring to bring cheaper fixes, but instead may face slightly higher rates than anticipated. While arrears remain low, the pressure point is new affordability rather than existing borrower stress.”
