The Bank of England’s latest Mortgage Lenders and Administrators Statistics showed a strong rebound in mortgage activity during Q3 2025, with significant increases in new lending, higher levels of high-LTV advances and a fall in arrears.
The outstanding value of all residential mortgage loans rose by 0.9% compared with the previous quarter to £1.73tn, which is 2.9% higher than a year earlier.
Gross mortgage advances increased markedly, rising by 36.9% on the quarter to £80.4bn.
This represents the largest quarterly increase in new advances since Q3 2020 and is 22.7% above the level seen a year ago.
New mortgage commitments also rose, up 1.6% to £79.4bn, the highest level recorded since Q3 2022 and 20.3% higher than a year earlier.
High-LTV lending continued to grow. The share of advances with an LTV above 90% increased to 7.4%, up 0.3% on the quarter and the highest proportion since Q2 2008.
High loan-to-income (LTI) lending also increased, with the proportion of advances at elevated LTIs rising 3.3% to 44.7%, although still slightly below the figure recorded a year earlier.
The share of gross advances for house purchase for owner-occupation increased to 58.6%, a rise of 2.5% on the quarter, though remaining below last year’s level.
Remortgaging for owner-occupation accounted for 28.6% of advances, slightly down on the quarter but 5.8% higher than a year earlier.
Mortgage performance indicators improved. Outstanding balances in arrears fell by 2.9% on the quarter to £20.6bn, leaving arrears 5.8% lower than a year earlier.
The proportion of all mortgage balances in arrears held steady at 1.2%.
New arrears cases made up 8.8% of total arrears balances, the lowest share since Q1 2022 and 0.9% below last year’s level.
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.”
