Broker network Stonebridge says mortgage applications rose 7% year-on-year in October, while competition between lenders pushed average rates up 21 basis points to 4.43%.
According to Stonebridge’s latest Mortgage Market Briefing, the average loan size fell to £195,068 in October, compared to £197,200 in October last year.
Stonebridge chief executive Rob Clifford said: “The fact that mortgage applications are up more than 7% year-on-year shows that the market is still moving forward, despite wider economic uncertainty and speculation surrounding the Autumn Budget.
“One of the main reasons is that lenders continue to compete aggressively. Many of the major high street chains have cut rates in recent weeks, meaning the average borrower is now saving around £300 a year compared to 12 months ago. That may seem like a small saving, but it all adds up at a time when many people are still struggling with the rising cost of living.
“If, as expected, we see another rate cut before the end of the year, that could provide even more momentum as we move into 2026. Combined with the high volume of fixed-rate loans maturing this year and next, we expect activity to strengthen further over the next twelve months.”
Nearly all customers (94.8%) opted for fixed-term mortgages in October 2025, the report said.
However, that share is lower than a year earlier, when it was 97.1%.
Clifford said: “Fixed deals offer the security of predictable repayments, which is particularly attractive at a time of uncertainty. However, a growing group of borrowers appear willing to accept the risk of fluctuating payments in the hope that interest rates will fall further, as widely predicted.”
The most popular mortgage terms were two to three year terms, with 42.8% of customers choosing this, compared to 35.6% in October 2024.
The second most popular was the five-year term, with a 23.6% share, and then a one- to two-year term with 21.5%.
Clifford said the Bank of England has “maintained a cautious tone, which has discouraged many borrowers from opting for variable rate deals”.
He added: “What we have seen instead is a surge in demand for fixed short-term interest rates. These products offer the best of both worlds: protection against immediate interest rate volatility without being locked in for the long term. Many borrowers see this as a sensible middle ground, allowing them to take advantage of potential future rate cuts while still retaining a degree of certainty.”
“But since August’s unexpectedly low inflation data, sentiment has changed. Markets are now pricing in another rate cut before the end of the year, rather than waiting until spring. If that materializes, we could see more borrowers opting to enter into longer-term deals to secure attractive interest rates in case the outlook changes again.”
Refinancing continues to dominate lending, accounting for 62.5% of sales in October 2025, while 37.5% related to home purchases.
A year ago, refinancings amounted to 57.3%, while purchases amounted to 42.7%.
Clifford said: “At first glance, the data might suggest that the purchase market is subdued, but that is not the case. Purchase loans have exceeded last year’s levels almost every month so far this year. It is simply the volume of loans maturing in 2025 that has tilted the market toward refinancing.”