Lending health check - winning at half time and all to play for
The first half of 2025 brought a wave of optimism to the UK mortgage market, fueled by falling interest rates and rising consumer confidence. The FCA’s mortgage lending statistics show that gross mortgage advances soared to £77.6 billion, a 12.8% jump from Q4 2024 and a 50.4% increase year on year, meaning the market hit its highest level since 2022.
The share of gross mortgage advances for house purchases for owner occupation also increased by 2.6 percentage points from the previous quarter to 66.3%, the highest share since the second quarter of 2021.
Of this 66.3%, lending to first-time buyers increased by 1.8% points to 31.4%. This represented the highest level of lending to first-time buyers since the authority began reporting in 2007.
This surge in borrowing was fueled by first-time buyers and a rush to beat the stamp duty hikes and was supported by relaxed affordability criteria and new lender innovations, opening the door to more potential homeowners.
House prices grew steadily in the first half of 2025, rising 6.4% year on year to an average of £273,427 by May. Forecasts for the rest of 2025 suggest modest growth of 0-3%, which offers a stable environment for future buyers.
In April, the Bank of England reduced the base rate to 4.25%, which also enhanced affordability by enabling lenders to offer sub-4% mortgage rates on low-LTV products. While some lenders adjusted rates in response to inflation, the market remains attractive, with 1.6 million fixed-rate mortgages due to expire in 2025, giving borrowers opportunities to secure favorable new deals at an average standard variable rate of 7.38%.
The market so far has shown resilience, but there are some signs that the road ahead could get a little bumpy. New mortgage approvals for house purchases fell to 60,500 in April 2025, down from 3,100 in March and below expectations, marking a third consecutive monthly decline.
Net borrowing also fell to -£0.8 billion, against forecasts of £-0.5 billion, signalling a sharp slowdown, and repossessions also climbed 7.2% from Q4 2024, reflecting persistent financial struggles amid elevated interest rates and general cost of living pressures.
However, remortgaging gained traction, with 35,300 approvals for lender switches, as homeowners took advantage of competitive rates.
The market’s outlook for the rest of 2025 is mixed, but it is also well poised for continued strength. Lower rates and flexible lending have sparked strong growth in the first half of the year, especially among first-time buyers and older borrowers, and as fixed-rate deals expire, borrowers can explore attractive remortgaging options later in the year, ensuring stability and opportunity.
Regardless of the interest rate environment, at Vida we offer a range of solutions to support your clients with affordability. This ensures that, whatever direction the mortgage market takes this year, they can maximise their borrowing potential.
Our 3&Easy range of 97% LTV residential mortgage products are aimed at helping long-term renters and first-time buyers to get a foot on the property ladder and begin to move up the chain. The entire 3&Easy range is available with all the usual flexible criteria from Vida, and is available to those with an adverse credit history, complex or second job income and the self-employed & contractors.
The range includes a 5-year product that will give your clients longer-term stability with their monthly payments and offers a potential loan term of up to 45 years, assisting customers even further with affordability. So even if government mandates result in increasing property costs, and uncertainty over further rate cuts drags on, the market is one of opportunity if you know where to look for help.