Mortgage lending jumped 16% in 2025 to reach its highest level since 2021 signalling renewed momentum in the housing market despite ongoing affordability pressures.
According to the latest Household Finance Review from UK Finance, 720,000 house purchase loans were completed last year, up 16.3% on 2024.
Early activity was driven by buyers rushing to beat April’s stamp duty changes, with lending levels stabilising at slightly above normal levels through the remainder of the year.
First-time buyers played a central role in the recovery. A total of 391,000 loans were advanced to new entrants in 2025, up from 332,000 the previous year, supported by new product innovation and July’s regulatory changes aimed at widening access to credit.
AFFORDABILITY STRETCHED
In Q4, first-time buyers were spending 22.1% of their gross income on initial mortgage repayments – close to the highs recorded during the 2023 rate spike.
Refinancing activity strengthened sharply as borrowing costs eased in the second half of the year. Some 511,000 loans were advanced in Q4 alone, up 25% year on year, with internal product transfers dominating as borrowers sought certainty ahead of further rate movements.
The number of mortgages in arrears fell to 90,050 in Q4 – the seventh consecutive quarterly decline – while possessions dipped, partly reflecting the industry’s voluntary pause over the holiday period.
Beyond the mortgage market, household finances appear resilient. Cash ISA deposits were up 15% year on year in December, and notice account balances rose 10%, suggesting a continued preference for longer-term savings. Overdraft use remains historically low, and fewer than half of credit card balances are accruing interest.
CAUTIOUS RECOVERY
Eric Leenders, Managing Director of Personal Finance at UK Finance, says: “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.
“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.”
“Household savings continued to grow in the final quarter of 2025, while credit card balances with interest remained at record lows, with consumers increasingly using credit cards for ease and convenience rather than to manage financial pressures.”
IMPROVING CONFIDENCE
Mary-Lou Press, President of NAEA Propertymark (National Association of Estate Agents), says: “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.”
