The share of gross mortgage advances with a Loan-to-Value (LTV) ratio above 90% increased by 0.9% in the fourth quarter of 2025 from the previous quarter to 8.3%, the Financial Conduct Authority and the Prudential Regulation Authority revealed. This represents the highest share since the second quarter of 2008 and was 2.1% higher than a year earlier.
The latest Mortgage Lending and Administration Return (MLAR) figures show that the share of lending to borrowers with a high loan-to-income ratio (LTI) rose 1.7% from the previous quarter to 46.5%, the highest since the last quarter of 2022, and was 0.6% higher than a year earlier.
It also shows that the outstanding value of all residential mortgages rose by 0.8% to £1,734.4 billion in the final quarter of 2025 compared to the third quarter, the highest number of mortgages outstanding since reporting began in 2007.
Meanwhile, the value of gross mortgage advances fell 1.3% on the previous quarter to £79.4 billion, but remained 15.4% higher than a year earlier.
Data also shows that the value of new mortgage commitments fell 11.9% from the previous quarter to £69.9 billion, the biggest fall since the third quarter of 2023, but remained 0.8% higher than a year earlier.
Elsewhere, the share of gross mortgage advances for buy-to-let (BTL) purposes rose 0.2% on the previous quarter to 8.4%.
The share of gross mortgage advances for the purchase of a house for private occupancy increased by 3.0% compared to the previous quarter to 61.6%, the largest increase in share since the third quarter of 2024.
The share of gross advances for remortgages for owner-occupied homes fell by 3.1% compared to the previous quarter to 25.4%, 1.9% more than a year earlier.
Meanwhile, the data shows that the value of outstanding mortgage balances in arrears fell 0.9% from the previous quarter to £20.4 billion, 5.3% lower than the same period 12 months ago.
The share of total outstanding balances of mortgage loans in arrears, relative to all outstanding mortgage balances, remained the same as in the previous quarter at 1.2%, while the share of total outstanding balances with payment arrears that are new payment arrears increased by 0.6% compared to the previous quarter to 9.4%, the first increase since the second quarter of 2023.
Commenting on the latest data, Quilter mortgage expert Karen Noye said: “The fourth quarter lending figures reflect a market that has begun to thaw as affordability slowly improves.”
“Borrowers who had been on the sidelines for much of 2024 are cautiously re-entering the market, helping to explain the increase in high LTV (LTV) loans to 8.3%, the highest since 2008, and the increase in high LTI loans to 46.5%. These were signs of a return of pent-up demand rather than speculative behavior.”
“The shift in the lending mix reinforces that picture. The share of lending for home purchases rose by 3 percentage points, the largest quarterly jump since 2024, while mortgage refinancing fell by a similar amount.”
“That pattern generally reflects buyers taking advantage of a period when interest rates have stabilized and affordability has eased just enough to allow transactions to resume. Gross advances are down marginally, but are still more than 15% higher than a year earlier, which fits the same story.”
“The delinquency data also indicated that the market was on more stable footing. Outstanding delinquent balances fell to their lowest level since 2023, and the overall share of delinquencies remained at 1.2%. That stability gave lenders the confidence to support higher LTV and higher LTI segments without increasing risk too aggressively.”
“The challenge is that this gradual improvement in affordability was based on falling swap rates and the expectation of rate cuts through early 2026. The US-Iran conflict has disrupted that trajectory. Higher oil prices and market volatility have pushed swaps back up, causing lenders to halt or reverse planned cuts.”
“This will likely hit precisely the groups that have returned to the market. For first-time marketers, even a small price increase could wipe out the marginal affordability gains that enabled activity in the fourth quarter. High LTV loans, which have finally recovered, are particularly vulnerable to tightening or repricing.”
Stonebridge Business Partnerships Director Jo Carrasco added: “The Budget caused headaches for buyers last autumn, and this is when it really shows up in the numbers.”
“New loan growth came to a halt, but it is important to remember that these were still more than 15% higher than a year earlier, following the biggest rise in mortgage advances in five years in the previous quarter. No one expected this to repeat.”
“It’s the approval ratings that we’re seeing the big change this time around and obviously all fingers are pointing to the nervousness surrounding the November Budget, with rumors of big tax hikes floating around. Buyers simply took their foot off the accelerator and bided their time.”
“We saw a strong recovery in December as budget uncertainty subsided, and we will see how housing market activity will develop in the first half of this year given the interest rate uncertainty created by the conflict in the Middle East.”