UK mortgage gross lending increased by more than a fifth during 2025, although substantially slower growth in outstanding balances points to significant refinancing and redemption activity across lenders’ back books.

The latest annual rankings from UK Finance show gross lending reached £282.1bn, up 20.1% from £234.8bn in 2024.

However, total mortgage balances increased by just 3.3%, from £1.61trn to £1.66trn, suggesting much of the new business replaced loans being redeemed rather than delivering comparable book growth.

Buy-to-let lending recovered even more strongly, rising by 22.6% from £32.8bn to £40.2bn during the year.

SANTANDER LEADS GROWTH

Santander delivered the largest percentage increase in gross lending among the major banks, rising by 57.6% from £15.8bn to £24.9bn.

It outpaced Barclays, which grew by 41.6%, NatWest at 30%, HSBC at 27.3% and Nationwide at 18.2%. Lloyds Banking Group recorded the slowest growth among the six at 11.1%, but remained the largest lender for both gross lending and balances outstanding.

Barclays moved ahead of Santander in the outstanding balances ranking, although both finished the year with £167.1bn.

In buy-to-let, Santander’s gross lending almost tripled from £570m to £1.69bn, an increase of 196.5% that moved it from 14th to sixth place. NatWest and HSBC also expanded their BTL lending by 65.9% and 59.8% respectively.

SPECIALISTS BUILD MOMENTUM

Several specialist and challenger lenders made progress further down the rankings.

Topaz Finance increased its outstanding balances by 26.1%, moving from 15th to 13th, while Pure Retirement climbed from 27th to 21st following growth of 22.4%. MPowered Mortgages advanced seven places to 43rd after growing its balances by a third.

Vida Homeloans increased its outstanding balance by 29.2%, while Kensington Mortgage Company’s BTL balances surged by 61.6%, taking it from 28th to 21st.

Conversely, Metro Bank’s mortgage balances fell by a third to £4.8bn and Pepper Money recorded a 55.6% reduction to £800m.

Barclays’ BTL balance declined by 10.7% to £15.22bn despite increased gross lending, indicating that its legacy portfolio ran off faster than new lending replaced it.

BROKER CHOICE WIDENS

Alyson Perry, head of strategic partnerships at Sesame Bankhall Group, said: “2025 was a strong recovery year for the UK mortgage market with gross lending up 20% on the previous 12 months. However, what’s most striking is how that growth was spread across the market.

“Santander was the standout gainer, growing its gross lending by nearly 58%, and its buy-to-let lending nearly tripled. From our vantage point across the panel, we can see that lenders are actively vying for share, and brokers are seeing it in the form of more competitive criteria.

“The real story for advisers is further down the table. Lenders like Vida Homeloans growing its balance by 29.2% and Kensington growing its buy-to-let balance by 61.6% shows real momentum building outside the big six, particularly in specialist and buy-to-let lending.

“That’s good news for customer choice, but it also means brokers need to work harder to stay on top of a widening panel, which is exactly where a strong network or mortgage club relationship earns its value.”

SERVICING PRESSURES GROW

Richard Pike, sales and marketing director at Phoebus Software, added: “Gross lending is up over 20% but balances outstanding grew just 3.3%, which points to a lot of churn through redemptions and remortgaging.

“That’s not an operational environment where you can afford to use legacy servicing systems. It’s one where lenders need to process new completions and a wave of redemptions and product transfers accurately, and without dropping the ball on customer experience.”

“Uncertain market for the foreseeable future.”

And he said: “Santander nearly tripling its buy-to-let lending while Barclays’ buy-to-let book shrinks by over 10%, whilst overall assets grew to record levels, shows how differently major lenders are managing growth versus product diversification and back-book runoff right now.

“All are legitimate strategies and require robust servicing software to ensure a smooth customer experience.

“Overall, the figures reflect what we see from our client base, who are primarily specialist lenders. Our investment in automating specialist servicing to keep operational costs down and allow clients to deal with cases by exception is more relevant than ever, especially in such an uncertain market for the foreseeable future.”