Mortgage demand softens in Q2 as higher borrowing costs weigh on market, Stonebridge finds
The network reported that mortgage applications fell 18.5% year-on-year in Q2.
Mortgage demand softened in the second quarter of 2026 as higher borrowing costs and affordability pressures weighed on activity, according to Stonebridge’s latest Mortgage Market Index.
The network reported that mortgage applications fell 18.5% year-on-year in Q2, with purchase applications down 15.5%, first-time buyer applications falling 15.7% and remortgage activity declining 20.8%.
Stonebridge said average mortgage rates rose to 4.97% during the quarter, up from 4.49% a year earlier, as geopolitical tensions in the Middle East pushed oil prices, inflation expectations and swap rates higher.
The average purchase loan increased 0.57% year-on-year to £236,122, while first-time buyers borrowed an average of £216,984, up 1.48%.
Overall average loan sizes fell 1.78% to £209,932.
The data also showed borrowers increasingly opted for shorter-term products.
The proportion choosing 2-year fixed rates rose from 59.4% to 70%, while 5-year fixes fell from 32.3% to 23.2%.
Variable-rate mortgages also increased from 5.2% to 12.1% of applications.
Rob Clifford, chief executive of Stonebridge, said: “The second quarter was really a stick-or-twist moment for those thinking of moving, buying or remortgaging, and there’s no doubt we’ve seen activity slow a little as expected.
“However, the key thing to keep your eye on is the expected path for inflation as we move into the second half of the year. I am confident about the outlook.
“Borrowers are being put in a difficult position as oil prices and inflation in the UK can undermine the prospect of mortgage rate reductions and seductive, new product pricing.
“Before the latest flare-up, oil had been falling hard and much faster than expected. This had caught everyone by surprise and dragged borrowing costs down.
“It’s not impossible that we could find ourselves back on that path if the conflict settles down again but, if anything, we’ve learned to expect the unexpected when it comes to international affairs.”
He added: “Andrew Bailey has struck a cautionary tone recently and rising oil prices won’t encourage the MPC to drop rates, but it’s important to remember that mortgage rates and the Bank of England base rate are not the same thing.
“Swap rates, which the market uses to price mortgages, rose this year while the base rate went nowhere. So borrowing costs can fall back without the Bank of England doing anything and that’s exactly what had been happening until last week.
“Advisers need to remain alive to the elevated remortgaging opportunities this year, and make sure they’re as proactive as possible in helping past customers navigate movements in borrowing costs.”
Related
Stamp Duty still viewed as major cost barrier, YBS says
Beverley Building Society backs cattery owner with mixed-use mortgage refinance
Principality to increase mortgage rates by up to 0.18%
Mortgage advances rise 11.1% in Q2 – BoE
Skipton BS and The Co-operative Bank among latest lenders to update mortgage ranges
TSB to increase selected residential mortgage rates by 0.15%
Inverclyde homeowners record shortest mortgage repayment time, analysis finds
Over six million unsure how they will pay housing costs in retirement, Royal London finds
Atom bank reduces rates across residential range
Stonebridge says adviser recruitment service saved members £498,000
Two in five mortgage holders switch banks for better deals, data reveals
