Mortgage lending rises 16% to highest level since the pandemic: UK Finance

Mortgage lending grew strongly in 2025, rising by over 16% to its highest level since 2021, according to UK Finance's latest Household Finance Review for Q4 2025.

Activity in the first quarter was boosted by borrowers looking to beat the changes to stamp duty in April, while the remainder of the year saw lending return to just above standard levels.

The mortgage market saw innovation through 2025 with new products enabling more first-time buyers to get on the property ladder. 391,000 first-time buyer loans were granted in 2025, up from 332,000 in 2024.

Refinancing activity strengthened in the second half of the year. 511,000 loans were advanced in Q4 – up 25% on the same quarter in 2024, with internal product transfers remaining the most popular choice for those looking to refinance. More customers are set to come off fixed rate mortgages this year, which is expected to drive further growth in overall refinancing.

The easing of mortgage lending rules by the FCA in July allowed more people to access mortgage credit, but stretched affordability will still limit borrowers in 2026, UK Finance says. First-time buyers were typically spending 22.1% of their gross income on initial mortgage payments in Q4, close to the peak levels seen in 2023.

Arrears and possessions 

The number of mortgages in arrears continued to fall in Q4 2025 to 90,050, the seventh consecutive quarter of contraction. Meanwhile, there was an expected dip in possessions in Q4 due to the industry’s voluntary pause on possessions over the holiday period.

Eric Leenders, managing director of personal finance at UK Finance, said: “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.”