House purchase and refinancing volumes rise as FCA reviews access rules
Mortgage market activity in the third quarter of 2025 returned to positive territory, according to UK Finance, with both house purchase lending and refinancing volumes increasing after a subdued second quarter.
The trade body’s quarterly Household Finance Review, published today, shows that lending for home purchase recovered following the surge in transactions brought forward ahead of April’s Stamp Duty changes and the slowdown that followed. Activity has now settled close to 2022 levels, despite ongoing affordability pressures.
Forward indicators suggest that momentum extended into October before easing off in November, pointing to a short period of stabilisation rather than a sustained upswing.
Refinancing volumes climb sharply
Refinancing showed a marked increase over the summer. UK Finance reported that 557,000 loans were advanced in the third quarter, representing a 48% rise on the same period in 2024, as more borrowers reached the end of fixed-rate deals.
Internal product transfers continued to dominate refinancing, underlining borrowers’ preference for speed and administrative simplicity when switching options at the end of an initial term.
Affordability strain and regulatory debate
Affordability remains stretched for new entrants. First-time buyers are still committing around 22% of gross household income to mortgage payments, the highest proportion for almost 20 years.
The Financial Conduct Authority’s Mortgage Rule Review has prompted renewed debate over the extent to which prudential rules could be adjusted without undermining borrower resilience. While the framework introduced since the financial crisis has helped keep arrears low, it has also narrowed access for some groups.
Interest-only borrowing has fallen from more than a quarter of new lending in 2005 to about 1% today, while the share of loans to self-employed borrowers has dropped from 15% to under 9%. These shifts illustrate how regulation has reshaped product mix and customer profiles, but also where access has tightened.
At the same time, more borrowers are extending mortgage terms to manage monthly payments, feeding through into higher loan-to-income (LTI) ratios. The Financial Policy Committee’s LTI cap has limited this, but a modest easing of the constraint earlier this year has supported an increase in higher-LTI lending, particularly for first-time buyers. Through the third quarter, the number of first-time buyer loans was 11% higher than in the same period of 2024.
UK Finance’s analysis suggests that incremental changes to existing rules could broaden access at the margins, especially for groups such as the self-employed, without fuelling unsustainable levels of demand.
For mortgage professionals, the figures point to a market characterised by modest volume growth, tight affordability and a regulatory environment under active review. Any future adjustments to mortgage rules are likely to focus on targeted support for constrained segments, while maintaining safeguards designed to limit arrears and systemic risk.
“It remains a balancing act for policymakers,” said Eric Leenders (pictured right), managing director of personal finance at UK Finance. “Mortgage lending returned to growth in the third quarter after a quieter start to the year, while refinancing also increased as more customers rolled off fixed rate deals.
“Affordability remains tight, but recent regulatory adjustments are helping widen access at the margins, and the FCA’s review raises important questions about how rules could be adapted to support underserved groups such as the self employed.”
For Mary-Lou Press, president of NAEA Propertymark, the return to growth in lending and the sharp rise in refinancing are welcome signs of renewed confidence, though affordability pressures continue to hold many prospective buyers back.
“Many agents are still seeing buyers stretch loan terms or rely on higher loan-to-income ratios simply to enter the market; therefore, it would be a welcome step to see regulatory change matched with a long-term plan to increase housing supply and genuinely improve affordability,” Press said.
“We hope that policymakers focus on reforms that support accessible and sustainable homeownership.”
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