UK mortgage lending surged in the third quarter of 2025 as increased buyer demand and improving market sentiment pushed activity to its highest level in years, new figures from the Bank of England show.
The Bank’s latest Mortgage Lenders and Administrators Statistics reported a sharp rebound across the market, with gross mortgage advances jumping 36.9% to £80.4bn – the strongest quarterly rise since 2020. The upturn reflects renewed momentum in the housing market following a subdued start to the year.
Outstanding residential mortgage balances rose 0.9% over the quarter to £1,73trn , standing 2.9% higher than a year earlier. New mortgage commitments also strengthened, increasing 1.6% to £79.4bn, the highest level since Q3 2022 and up 20.3% year-on-year.
Higher-risk lending also grew. High loan-to-value advances (above 90% LTV) edged up to 7.4% of new lending — the highest share since mid-2008 and 0.8% above last year. Lending to borrowers with higher loan-to-income ratios climbed 3.3% to 44.7%, the largest quarterly increase since Q3 2020, although still slightly below the level recorded a year earlier.
The figures point to a broad-based rise in mortgage activity, with growth spanning both mainstream and higher-risk segments of the market.
Owner-occupier purchase activity continued to strengthen in the quarter. House purchase loans made up 58.6% of gross advances, a rise of 2.5 percentage points on the previous quarter, though still 5.8 percentage points below the level recorded a year earlier. Remortgaging for owner-occupation dipped slightly, down 0.4 percentage points to 28.6%, but remained 5.8 percentage points higher than a year ago.
Mortgage performance also showed signs of improvement. Outstanding balances in arrears fell 2.9% to £20.6bn and were 5.8% lower than a year earlier. The share of total mortgage balances in arrears held steady at 1.2%, down 0.1 percentage points year-on-year. New arrears cases accounted for 8.8% of all arrears balances, a marginal quarterly decline of 0.1 percentage points and the lowest level since the first quarter of 2022.
Richard Pike, chief sales and marketing officer at Phoebus Software, said: “These figures demonstrate the mortgage market was in rude health over the summer, with overall lending up for the seventh consecutive quarter.
“Gross advances saw the largest quarterly increase for five years as borrowers took advantage of falling rates following the Bank of England’s base rate cut in August. New mortgage commitments were also at their highest since Q3 2020, showing a strong pipeline for lenders for the rest of the year.
He added: “Just under half of this lending [44.7%] was to borrowers with high loan-to-income ratio as mortgage companies offer more low deposit products. This is opening the possibility of home ownership to more people and stimulating market activity but comes with higher risk. The fact that arrears rates are continuing to fall suggests that lenders are getting the balance right here, and demonstrates the resilience of households in the face of cost-of-living pressures.
“It will be interesting to see next quarter’s figures when we’ll see how the uncertainty leading up to the Budget affected borrower behaviour.”
Simon Gammon, managing partner, Knight Frank Finance, commented: “Mortgage lending data has been volatile through 2025. The second quarter was unusually weak as buyers brought forward purchases to avoid changes to stamp duty thresholds on April 1st, so the 36.9% quarterly rise in gross mortgage advances is the market reverting back to trend. That said, £80bn in advances represents a remarkable display of resilience given the fiscal and economic uncertainties that borrowers faced during the three months through September.
“The value of new mortgage commitments surged by more than a fifth year-on-year. Borrowers can now access fixed rates as low as 3.55%, and while that’s quite a bit higher than before the pandemic, mortgage rates have settled at a level that buyers are clearly comfortable with. Should inflation data continue to move in the right direction, lenders will keep trimming rates and we should see a busier spring selling season in 2026.”
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