Mortgage lending for home purchases rebounded in the third quarter after falling ahead of April’s stamp duty deadline.
The latest data from the UK financial sector shows Home purchase loans in the first three quarters of this year reached 128 billion pounds, an increase of 25% over the same period last year.
Third quarter figures show that home purchase loans were lent to house movers and first-time buyers at £45.6bn in the three months from July to September, up 43% from £32bn in the April to June period after a stamp duty hike.
However, total lending in the third quarter was still down from the £51bn in purchase loans in the first quarter, when buyers were trying to complete purchases in time for tax increases.
The Treasury said refinancing also picked up in the third quarter after a slow start to the year.
The report said 557,000 remortgage and product transfer loans were issued in the third quarter, a 48% increase from the same quarter in 2024.
Internal product transfers continue to account for the majority of refinancings, reflecting customer preferences for ease and speed when launching fixed-rate deals.
The banking trade body said affordability had improved but remained “extremely tight”, with first-time buyers still paying around 22% of total household income on a mortgage each month – the highest proportion in almost two decades.
The FCA’s recent review of mortgage rules has sparked debate about whether lending rules can be adjusted to support wider home ownership, the report said. “While current rules help keep arrears low, they also limit access to certain groups,” the report said.
Interest-only loans have fallen from more than a quarter of new loans in 2005 to just 1% today, while loans to self-employed borrowers have also fallen from 15% to less than 9%, the report said.
At the same time, the report noted that an increasing number of borrowers are extending loan terms to manage affordability, leading to an increase in loan-to-income (LTI) borrowing.
The Financial Policy Committee’s cap has kept this in check, but modest easing earlier this year has supported more lending at higher LTIs, particularly to first-time buyers, with FTB lending up 11% in the third quarter compared with the same period in 2024.
Eric Leenders, managing director of personal finance at UK Finance, said: “After a quieter start to the year, mortgage lending returned to growth in the third quarter, while refinancing also increased as more customers launched fixed-rate deals.
“Affordability remains tight, but recent regulatory changes have helped to expand access at the margins, and the FCA’s review raises important questions about how rules can be adapted to support underserved groups such as the self-employed.”
“While mortgage activity has picked up, the market remains well balanced,” said Mary-Lou Press, president of NAEA Propertymark.
“Returning to loan growth and a significant increase in refinancing are welcome signs of renewed confidence, but affordability pressures continue to hold back many would-be buyers, particularly first-time buyers, who now spend the highest proportion of their income on mortgage payments.
“Many agents are still seeing buyers extending their loan terms or simply relying on higher loan-to-income ratios to enter the market; so it would be a welcome step to see regulatory changes aligned with long-term plans to increase housing supply and truly improve affordability.
“Households continue to save cautiously amid economic uncertainty, reminding us that confidence remains fragile.
“We want policymakers to focus on reforms that support accessible and sustainable home ownership.”
