Bank of England data reveals biggest quarterly rise in mortgage loans since 2020

Finance Reporter, Yahoo Finance UK

Updated

Tue 9 December 2025 at 6:30 am GMT-5

3 min read

UK mortgage lending recorded its strongest quarterly jump in five years in the third quarter of 2025, with gross advances rising 36.9% to £80.4bn, according to new data from the Bank of England (BoE). The increase marks the sharpest quarterly gain since 2020 amid a renewed surge in the UK property market.

The total value of outstanding residential mortgages rose 0.9% in the quarter to £1,733.7bn, 2.9% higher than a year earlier. New mortgage commitments increased 1.6% to £79.4bn, the highest since the third quarter of 2022 and 20.3% higher than a year ago.

Higher-risk lending continued to expand. The share of high loan-to-value (LTV) lending, with LTVs above 90% rising by 0.3 percentage points to 7.4%, the highest since the second quarter of 2008 and 0.8 percentage points higher than a year earlier.

Lending to borrowers with elevated loan-to-income ratios increased by 3.3 percentage points to 44.7%, the largest quarterly rise since the third quarter of 2020, though still 0.6 percentage points below last year’s level.

Owner-occupier purchase activity strengthened. House purchase loans accounted for 58.6% of gross advances, up 2.5 percentage points on the quarter but still 5.8 percentage points lower than a year earlier. Remortgaging for owner-occupation decreased by 0.4 percentage points to 28.6%, but remained 5.8 percentage points higher year-on-year.

Mortgage performance indicators also improved. Outstanding balances in arrears fell 2.9% to £20.6bn and were 5.8% lower than a year earlier. The proportion of total mortgage balances in arrears held steady at 1.2%, 0.1 percentage points below last year’s level. New arrears cases accounted for 8.8% of all arrears balances, down 0.1 percentage points on the quarter and at their lowest since Q1 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.

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“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.”

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