First-time buyer growth and refinancing drive lending to highest level since 2021
Mortgage lending rose by more than 16% in 2025 to its highest annual level since 2021, according to UK Finance’s Household Finance Review for the fourth quarter of 2025.
Activity was front-loaded, with a stronger first quarter as borrowers brought forward transactions ahead of changes to stamp duty in April. Volumes over the remainder of the year eased back towards, but slightly above, more typical levels.
First‑time buyer numbers increased, supported by product innovation that broadened access to home ownership. Lenders advanced 391,000 loans to first‑time buyers in 2025, up from 332,000 in 2024.
Refinancing gathered pace in the second half of the year. In the fourth quarter alone, 511,000 loans were advanced, a 25% increase on the same period in 2024, with internal product transfers remaining the most common route for customers seeking a new deal. With more borrowers due to reach the end of fixed‑rate terms this year, UK Finance expects refinancing volumes to remain elevated.
The Financial Conduct Authority’s relaxation of mortgage lending rules in July expanded access to mortgage credit. However, UK Finance warned that stretched affordability would continue to constrain borrowing capacity through 2026.
In the fourth quarter of 2025, typical first‑time buyers were spending 22.1% of their gross income on initial mortgage payments, close to the peak proportions recorded in 2023.
The stock of mortgages in arrears continued to decline. The number of accounts in arrears fell for a seventh consecutive quarter in Q4 2025, standing at 90,050.
Possessions slipped in the final quarter, reflecting the industry’s voluntary pause on repossessions over the holiday period.
“The mortgage market saw strong growth in 2025, with lending reaching its highest level since the pandemic and first-time buyer numbers supported by innovative products to widen access,” said Eric Leenders (pictured right), managing director of personal finance at UK Finance.
“Affordability remains tight despite regulatory easing, but the continued fall in arrears is reassuring, and gradually easing rates should help support borrowers in the year ahead.”
Mary‑Lou Press, president of industry body NAEA Propertymark, highlighted a combination of stronger volumes and continuing affordability strain.
“The continued growth in mortgage lending and the resilience of the market in 2025, including strong lending and refinancing volumes, reflects improving confidence among buyers and the benefit of widening access to mortgage credit. However, our member agents continue to report that affordability remains a significant barrier, particularly for first-time buyers who are committing a large share of their income to initial repayments.
“While falling arrears and the uptick in savings are positive signs, sustained focus is needed on improving housing supply and ensuring accessible, sustainable lending that doesn’t simply stretch borrowers’ budgets.”
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