Borrowing for house purchases saw growth in Q3 following the surge and slowdown around Stamp Duty changes earlier in the year. Lending is now around the stable levels seen in 2022, despite material affordability challenges. Forward‑looking data suggest growth continued into October before flattening in November.
After a slow start to the year, refinancing activity showed an uplift, with 557,000 loans advanced in Q3 – up 48 per cent on the same quarter of 2024. Internal product transfers continued to account for the majority of refinancing, reflecting customers’ preference for ease and speed when rolling off fixed‑rate deals.
Affordability and mortgage market access
Affordability remains very tight, with first‑time buyers still paying around 22 per cent of gross household income on monthly mortgage payments – the highest share for nearly two decades.
The Financial Conduct Authority’s (FCA) recent Mortgage Rule Review has opened debate on whether lending rules could be adjusted to support wider homeownership. While the current rules have helped keep arrears low, they have also limited access for some groups. Interest‑only lending, for example, has fallen from more than a quarter of new loans in 2005 to just one per cent today, and lending to self‑employed borrowers has dropped from 15 per cent to under nine per cent. These shifts show how regulation has reshaped the market but also highlight where access has narrowed.
At the same time, more borrowers are stretching loan terms to manage affordability, leading to a rise in higher loan‑to‑income borrowing. The Financial Policy Committee’s cap has kept this in check, but a modest relaxation earlier this year has supported more lending at higher LTIs, particularly to first‑time buyers, with 11 per cent more FTB loans through Q3 than in the same period of 2024.
The FCA’s review raises important questions about how rules could be adapted to widen access responsibly. Carefully considered changes, particularly around interest‑only lending, could help underserved groups such as the self‑employed, while maintaining safeguards that protect both households and the wider market.
Household savings
Savings continued to grow but at a slower rate, with deposits in notice accounts and cash ISAs still up by ten per cent or more through the quarter. More households reported precautionary saving against an uncertain economic backdrop, even as real wage growth softened and savings rates drifted lower. At the end of September, households held £295 billion in notice accounts and £207 billion in cash ISAs, respectively ten and 14 per cent higher than a year earlier.
Eric Leenders, MD of personal finance at UK Finance, said: “Mortgage lending returned to growth in the third quarter after a quieter start to the year, while refinancing also increased as more customers rolled off fixed‑rate deals. Affordability remains tight, but recent regulatory adjustments are helping widen access at the margins, and the FCA’s review raises important questions about how rules could be adapted to support underserved groups such as the self‑employed.
“Savings growth has moderated but remains strong by historic standards, with households continuing to build precautionary buffers against an uncertain economic backdrop ahead of the Autumn Budget.”
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