High-LTV lending is at its highest level since the financial crisis, but new mortgage lending commitments fell sharply towards the end of 2025, the latest mortgage lending figures from the FCA and PRA show.
The Mortgage Lending and Administration Return (MLAR) figures for Q4 2025 reveal that the stock of outstanding mortgage loans increased by 0.8% from the previous quarter to £1,734.4 billion, the highest level recorded since reporting began in 2007. Compared with a year earlier, the total value of mortgage lending was 3.0% higher.
However, some indicators suggested a cooling in new activity. The value of gross mortgage advances — the amount lenders actually provided during the quarter — fell by 1.3% to £79.4 billion compared with Q3. Despite the quarterly decline, advances remained 15.4% higher than a year earlier.
New mortgage commitments, which measure lending agreed but not yet advanced, dropped more sharply. The value of these commitments fell 11.9% quarter-on-quarter to £69.9 billion, marking the largest decrease since the third quarter of 2023. On an annual basis, however, commitments were still 0.8% higher.
The data also shows borrowers are increasingly taking on high-LTV loans. The share of gross mortgage advances with LTV ratios above 90% rose to 8.3%, up 0.9 percentage points from the previous quarter. This represents the highest share since the second quarter of 2008, and is 2.1 percentage points higher than a year earlier.
Similarly, the proportion of lending to borrowers with high loan-to-income (LTI) ratios climbed to 46.5%, an increase of 1.7 percentage points from the previous quarter and the highest level since late 2022.
Buy-to-let lending accounted for 8.4% of total advances, a slight increase of 0.2 percentage points quarter-on-quarter and 0.1 percentage points higher than a year earlier.
Meanwhile, the share of residential lending rose by 3 percentage points to 61.6%, the biggest quarterly rise since the third quarter of 2024. Despite the increase, the share remained 2.0 percentage points lower than a year earlier.
By contrast, residential remortgaging declined, with its share of advances falling 3.1 percentage points to 25.4%, the largest drop since the third quarter of 2024. Even so, this remained 1.9 percentage points higher than a year earlier.
Arrears remain low but new cases creep up
Mortgage arrears showed modest improvement overall. The value of outstanding mortgage balances with arrears fell 0.9% from the previous quarter to £20.4 billion, the lowest level since the third quarter of 2023 and 5.3% lower than a year earlier.
The proportion of total mortgage balances in arrears remained steady at 1.2%, unchanged from the previous quarter and 0.1 percentage points lower than a year earlier.
However, the share of arrears that were new cases rose 0.6 percentage points to 9.4%, marking the first increase since the second quarter of 2023, though the figure was unchanged compared with a year earlier.
Richard Pike, chief sales and marketing officer at Phoebus, commented: “There’s no doubt the uncertainty in the run-up to the November budget was a contributory factor to the mortgage market slowing down in the final quarter of the year.
“A large number of households put their plans on hold in anticipation of what was going to be announced by Rachel Reeves, which we can see in the latest set of figures from the Bank of England.
“The value of new mortgage commitments fell by 11.9% from the previous quarter, the largest decrease since Q3 2023, while the value of gross mortgage advances decreased by 1.3%. While the base rate reduction in December re-established momentum in the market, it wasn’t enough to deliver a meaningful increase by the end of the year.
“Positively however both figures were higher than the previous year, and the outstanding value of all residential mortgage loans increased by 0.8% from the previous quarter to 1,734.4 billion, the highest stock of outstanding mortgage loans since reporting began in 2007.
“Q4 saw an increase in the proportion of high loan to income lending to 46.5%, the highest since 2022 Q4, as lenders continued to relax lending criteria. The welcome news from these figures is that arrears rates continue to fall, showing that households are managing their finances. The warning sign for lenders will be if this figure starts to rise, and then servicing teams will need to be ready to support customers who may be in financial difficulty."
Karen Noye, mortgage expert at Quilter, added: "The Q4 lending figures capture a market that was beginning to thaw as affordability slowly improved. Borrowers who had spent much of 2024 sitting on the sidelines were cautiously re-entering the market, which helps explain the rise in high LTV lending to 8.3%, the highest since 2008, and the increase in high LTI borrowing to 46.5%. These were signs of pent up demand returning rather than speculative behaviour.
"The shift in the mix of lending reinforces that picture. The share of lending for house purchase rose by 3 percentage points, the biggest quarterly jump since 2024, while remortgaging fell by a similar amount. That pattern typically reflects buyers taking advantage of a period where rates have stabilised and affordability has eased just enough to make transactions possible again. Gross advances decreased marginally but are still more than 15% higher than a year earlier, which fits that same narrative.
"Arrears data also pointed to a market on steadier footing. Outstanding balances with arrears fell to their lowest level since 2023, and the overall arrears share held at 1.2%. That stability was giving lenders confidence to support higher LTV and higher LTI segments without broadening risk too aggressively.
"The challenge is that this gradual improvement in affordability was predicated on falling swap rates and an expectation of rate cuts through early 2026. The US–Iran conflict has unsettled that trajectory. Higher oil prices and market volatility have pushed swaps up again, prompting lenders to pause or reverse planned reductions. This is likely to affect exactly the groups who had been returning to the market. For first-time buyers, even a small rise in pricing can wipe out the marginal affordability gains that made Q4 activity possible. High LTV borrowing, which had finally recovered, is particularly vulnerable to tightening or repricing.
"For those remortgaging, the timing is also unhelpful. Many households were expecting the spring to bring cheaper fixes, but instead may face slightly higher rates than anticipated. While arrears remain low, the pressure point is new affordability rather than existing borrower stress."
