Mortgage lending for house purchase rebounded in the third quarter after a slump following the rush to beat April’s stamp duty deadline.

The latest figures from UK Finance show that house purchase lending for the first three quarters of the year reached £128 billion, which is 25% higher than the same period last year.

The Q3 data reveals that £45.6 billion was lent for purchase by both home movers and first-time buyers in the three months from July to September, up by 43% from £32bn between April and June, which was the immediate aftermath of the stamp duty increase.

However, Q3’s total remained below the £51bn lent for purchases in Q1, when buyers were trying to complete in time to beat the tax hike.

UK Finance says that refinancing also picked up in the third quarter after a slow start to the year.

It says 557,000 remortgage and product transfer loans were advanced in Q3 – up 48% on the same quarter of 2024.

Internal product transfers continued to account for the majority of refinancing, reflecting customers’ preference for ease and speed when rolling off fixed‑rate deals.  

The banking trade body says that affordability has improved, but remains “very tight”, with first‑time buyers still paying around 22% of gross household income on monthly mortgage payments – the highest share for nearly two decades.  

It says the FCA’s recent Mortgage Rule Review has opened debate on whether lending rules could be adjusted to support wider homeownership. “While the current rules have helped keep arrears low, they have also limited access for some groups,” it says.

Interest‑only lending has fallen from more than a quarter of new loans in 2005 to just 1% today and lending to self‑employed borrowers has dropped from 15% to under 9%, it says.

At the same time, it points out that more borrowers are stretching loan terms to manage affordability, leading to a rise in higher loan‑to‑income (LTI) borrowing. 

The Financial Policy Committee’s cap has kept this in check, but a modest relaxation earlier this year has supported more lending at higher LTIs, particularly to first‑time buyers, with 11% more FTB loans through Q3 than in the same period of 2024. 

UK Finance managing director of personal finance Eric Leenders says: “Mortgage lending returned to growth in the third quarter after a quieter start to the year, while refinancing also increased as more customers rolled off fixed‑rate deals. 

“Affordability remains tight, but recent regulatory adjustments are helping widen access at the margins, and the FCA’s review raises important questions about how rules could be adapted to support underserved groups such as the self‑employed.”

NAEA Propertymark president Mary-Lou Press says: “While mortgage activity has picked up, the market remains finely balanced. 

“The return to growth in lending and the sharp rise in refinancing are welcome signs of renewed confidence, but affordability pressures continue to hold many prospective buyers back, particularly first-time buyers, who are now committing the highest share of their income to mortgage payments in nearly twenty years.

“Many agents are still seeing buyers stretch loan terms or rely on higher loan-to-income ratios simply to enter the market; therefore, it would be a welcome step to see regulatory change matched with a long-term plan to increase housing supply and genuinely improve affordability.

“Households continue to save cautiously amid economic uncertainty, reminding us that confidence remains fragile. 

“We hope that policymakers focus on reforms that support accessible and sustainable homeownership.”