UK mortgage lending recorded its strongest quarterly jump in five years in the third quarter of 2025, with gross advances rising by 36.9% to £80.4bn, according to new data from the Bank of England (BoE). The increase marks the biggest quarterly gain since 2020 amid a strong rise in the UK property market.
The total value of outstanding residential mortgages increased by 0.9% in the quarter to £1,733.7bn, 2.9% higher than a year earlier. New mortgage commitments increased by 1.6% to £79.4bn, the highest since the third quarter of 2022 and 20.3% higher than a year ago.
Higher risk loans continued to expand. The share of high loan-to-value (LTV) loans, with LTVs above 90% increases 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.
Loans to borrowers with elevated loan-to-income ratios increased by 3.3 percentage points to 44.7%, the largest quarterly increase since the third quarter of 2020, although still 0.6 percentage points below last year’s level.
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The buying activity of the owner-occupier is strengthened. Home purchase loans accounted for 58.6% of gross advances, an increase of 2.5 percentage points over the three months but still 5.8 percentage points less than a year earlier. Owner-occupied remortgage decreased by 0.4 percentage points to 28.6%, but remained 5.8 percentage points higher year-on-year.
Mortgage performance indicators have also improved. Outstanding balances in arrears fell 2.9% to £20.6bn and were 5.8% less than a year earlier. The ratio 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, a decrease of 0.1 percentage points over the quarter and the lowest since Q1 2022.
Richard Pike, chief sales and marketing officer of Phoebus Software, said: “These figures show that the mortgage market has been in a strong state over the summer, with overall lending up for the seventh consecutive quarter.
“Gross advances saw their biggest quarterly rise for five years as borrowers took advantage of falling rates following the Bank of England’s August base rate cut.
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“New mortgage commitments were also at their highest since Q3 2020, showing a strong pipeline for lenders for the remainder of the year.”
He added: “Just under half of these loans (44.7%) were to borrowers with a high loan-to-income ratio as mortgage companies offer more products with low deposits. This is opening up the possibility of home ownership to more people and stimulating market activity but comes with higher risk.