Remortgage applications returned to annual growth in the third quarter, helping to offset a sharper decline in mortgage activity among home buyers, according to Stonebridge.

The mortgage and protection network’s Mortgage Market Index showed overall applications fell 7.7% year-on-year during Q3, a considerably smaller decline than the 18.5% recorded in the previous quarter.

The improvement was driven by remortgaging, where applications increased by 0.8% compared with Q3 2025. That followed a 20.8% annual fall in the second quarter.

Purchase activity moved in the opposite direction. Applications for home purchases were down 18.2% year-on-year, compared with a 15.5% fall in Q2, while first-time buyer applications dropped 18.6% after declining 15.7% in the previous quarter.

BORROWING COSTS REMAIN ELEVATED

Stonebridge said higher borrowing costs continued to constrain affordability during the quarter amid inflation concerns and uncertainty over public borrowing.

The average mortgage rate across its data was 4.92% in Q3, slightly below the 4.97% recorded in Q2 but 0.55 percentage points higher than a year earlier.

Purchase borrowers paid an average rate of 5.02%, up from 4.48% a year earlier, while the average first-time buyer rate rose from 4.56% to 5.11%. Remortgage rates averaged 4.85%, compared with 4.28% in Q3 2025.

Despite the increase in rates, first-time buyers borrowed more. Their average loan rose 4.2% year-on-year to £221,605, while their average LTV increased by 1.8 percentage points to 81.4%. The average first-time buyer purchase price was £278,116, 1.4% higher than a year earlier.

BORROWERS FAVOUR SHORTER DEALS

The figures also point to a shift in product choice as borrowers consider the possibility that mortgage rates could fall in future.

Variable-rate products accounted for 12.5% of mortgages in Q3, up from 4.9% a year earlier. Fixed rates consequently fell from 95.1% of business to 87.5%.

Among fixed-rate borrowers, two-year deals continued to dominate. They represented 67.5% of fixed-rate business, up from 61.4% in Q3 2025, although this was below the 70% recorded in the second quarter. Five-year deals accounted for 24.9%, down from 31.1% a year earlier.

Rob Clifford (pictured), chief executive at Stonebridge, said: “It’s a mixed picture for the housing market as elevated borrowing costs continue to put pressure on the volume of transactions and house prices.

“Meanwhile, the volume of remortgages continues to feed off a wave of ultra-low deals taken out during the pandemic era, which are now expiring.

“It’s so hard to predict where inflation and borrowing costs will go next but, one thing’s for sure, borrowers will be better protected if they take the opportunity to lock in rates as early as possible.

“Whether they’re buying property or remortgaging, mortgage advisers are alive to the importance of this approach and we know many who are diligently supporting their customers in this way. It costs nothing and, should rates rise further, it could knock hundreds of pounds a month off repayments.

“Everyone needs to be proactive to put themselves in the best possible position, and it’s no surprise that two-year mortgage deals continue to dominate. Borrowers don’t want to be tied into expensive mortgage products should the market ease and mortgage rates fall.”