Why the mortgage market is set for a stronger second half

The late England striker Jimmy Greaves famously called football a “game of two halves”. The same might be said of the UK mortgage market in 2025.

After a strong finish to 2024, activity picked up pace in early 2025 as many buyers rushed to beat the 31 March stamp duty deadline.

That is clear in the numbers, with purchase approvals soaring 29.2% year-on-year in January, 10.7% in February and 14.6% in March, according to UK Finance.

But while the looming deadline to some extent artificially boosted transactions, once it passed, the market softened. In April, for example, purchase approvals dipped 2.8% year-on-year, followed by a more modest 6.1% rise in May.

The market remains relatively subdued, with surveyors reporting that buyer demand and sales are “still struggling for momentum ”, according to the Royal Institution of Chartered Surveyors.
With demand slowing a little, house prices have also paused for breath. According to Halifax, prices were flat between May and June and, at an average of £296,665, were down 0.3% compared to three months earlier. However, they remain up 2.5% over the past year.

What does this all mean? Well, it points to a mixed picture so far in 2025: a fast start followed by a flatter period.

However, there are clear signs that the second half of the year will yield a more positive, consistent and dynamic market.

One reason is rates. Stonebridge’s latest Mortgage Market Briefing reveals that the average mortgage rate for new borrowers has fallen by 62 basis points over the past 12 months to 4.51%. For the typical borrower, that’s an annual saving of around £888  – a meaningful improvement in monthly affordability at a time when household budgets remain stretched for many.

There’s room for further improvement, too. While five-year swap rates are roughly where they were a year ago, we’re seeing lenders come to market with sharper rates. That’s a sign of strong competition in the market and great for consumers. 

With the Bank of England expected to cut the base rate at least once – and perhaps twice – more this year, we believe there is a very high likelihood of keener pricing in the second half of the year.

Some market observers believe that further reductions in borrowing costs are already priced into swaps, thereby limiting the scope for lower mortgage rates. But after a quieter second quarter, lenders will be keen to boost volumes to hit their year-end targets.

Meanwhile, the remortgage market is set to provide a healthy stream of business for proactive brokers. Around 1.8 million fixed rate deals are due to mature this year, with a significant number concentrated in the second half. And as rates stabilise or fall, we may see more borrowers looking to shop around for a better rate rather than opting for a product transfer.

I get a sense, too, that sentiment is starting to improve. If you look at RICS’s latest Residential Market Survey, a net balance of +25% surveyors say they expect sales activity to rise over the next 12 months. That’s the most optimistic reading since February. That echoes what we’re seeing within our network, where June delivered a record number of mortgage applications, driven by both movers and remortgage clients.

What’s more, eight out of 10 advisers within our network have a ‘positive’ or ‘very positive’ outlook for the market with over 70% expecting completed business to be up on the prior 12 months.

The lenders I speak to are also increasingly upbeat. A senior contact at a Big 6 lender recently told me they believe lending could finish the year more than £20-22bn above UK Finance’s estimate of £260bn for 2025.

In short, while the first half of 2025 was a period of realignment, the second half offers real opportunity.

Borrowers are adapting to the new normal mortgage rates of around 4%, affordability is improving, and pipelines are building. And if even more rate cuts materialise, the market will gain momentum quickly. 

We’re not forecasting fireworks, but the direction of travel is positive. The market has steadied and with the right conditions, a strong finish to the year is very likely indeed.