Q4 2025 data shows easing conditions drew borrowers back, but repricing fears are back in focus
Mortgage lending data for the fourth quarter of 2025 suggested a tentative return of buyer demand as affordability eased, but renewed rate volatility is now raising the risk that the recovery stalls, particularly for higher loan-to-value (LTV) borrowing.
The Bank of England’s Mortgage Lenders and Administrators Statistics showed the share of gross advances at LTV ratios above 90% rose to 8.3%, the highest since the second quarter of 2008, while lending at high loan-to-income (LTI) ratios increased to 46.5%, the highest since the fourth quarter of 2022.
The stock of outstanding residential mortgage lending rose to £1.73 trillion, up 0.8% on the quarter and 3% year on year. Gross mortgage advances fell 1.3% over the quarter to £79.4 billion but were 15.4% higher than a year earlier.
New mortgage commitments dropped 11.9% to £69.9 billion, the largest quarterly fall since the third quarter of 2023, though still 0.8% higher than a year earlier.
By purpose, lending for house purchase for owner occupation increased to 61.6% of gross advances, up three percentage points on the quarter, while remortgaging for owner occupation fell to 25.4%, down 3.1 percentage points. Buy-to-let’s share rose slightly to 8.4%.
Arrears eased in value terms. Outstanding mortgage balances with arrears fell 0.9% on the quarter to £20.4 billion, the lowest since the third quarter of 2023, and were 5.3% lower than a year earlier. The arrears share was unchanged at 1.2% and was 0.1 percentage points lower than a year earlier. New arrears cases accounted for 9.4% of total arrears balances, up 0.6 percentage points over the quarter and unchanged from a year earlier.
| Residential loans to individuals, flows and balances: Regulated and non-regulated mortgages (in £ billions), not seasonally adjusted | ||||||||
|---|---|---|---|---|---|---|---|---|
| Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | |
| Flows | ||||||||
| Gross advances | 51.6 | 60.2 | 65.5 | 68.8 | 77.6 | 58.8 | 80.4 | 79.4 |
| New commitments | 60.2 | 66.9 | 66.1 | 69.4 | 68.3 | 78.2 | 79.4 | 69.9 |
| Amounts outstanding | 1,670.0 | 1,676.3 | 1,674.7 | 1,683.4 | 1,702.4 | 1,707.1 | 1,721.3 | 1,734.4 |
| Source: Bank of England | ||||||||
“The Q4 lending figures capture a market that was beginning to thaw as affordability slowly improved,” commented Karen Noye (pictured right), mortgage expert at Quilter. “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.
According to Noye, the Middle East conflict is likely to affect 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,” she said. “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.”
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