The share of gross mortgage advances with loan-to-value (LTV) ratios exceeding 90% increased by 0.9% in Q4 2025 from the previous quarter to 8.3%, the Financial Conduct Authority and Prudential Regulation Authority reveals, representing the highest share since Q2 2008 and was 2.1% higher than a year earlier.
The latest Mortgage Lending and Administration Return (MLAR) figures data found that the proportion of lending to borrowers with a high loan-to-income (LTI) ratio increased by 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 mortgage loans increased by 0.8% to £1,734.4bn in the final quarter of 2025 compared the Q3, the highest stock of outstanding mortgage loans since reporting began in 2007.
Meanwhile, the value of gross mortgage advances decreased by 1.3% from the previous quarter to £79.4bn, but remained 15.4% higher than a year earlier.
Data also shows that the value of new mortgage commitments declined by 11.9% from the previous quarter to £69.9bn, the largest decrease since Q3 2023, but remained 0.8% higher than a year earlier.
Elsewhere, the share of gross mortgage advances for buy-to-let (BTL) purposes increased by 0.2% from the previous quarter to 8.4%.
The share of gross mortgage advances for house purchase for owner occupation increased by 3.0% from the previous quarter to 61.6%, the largest increase in share since Q3 2024.
The share of gross advances for remortgages for owner occupation decreased by 3.1% from the previous quarter to 25.4%, 1.9% higher than a year earlier.
Meanwhile, the data reveals that the value of outstanding mortgage balances with arrears decreased by 0.9% from the previous quarter to £20.4bn, 5.3% lower than the same period 12 months ago.
The proportion of the total mortgage loan balances with arrears, relative to all outstanding mortgage balances, has stayed the same as the previous quarter at 1.2%, while the proportion of total outstanding balances with arrears that are new arrears cases increased by 0.6% from the previous quarter to 9.4%, the first increase since Q2 2023.
Commenting on the latest data, Quilter mortgage expert Karen Noye says: “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 loan to value (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.”
Stonebridge business partnerships director Jo Carrasco adds: “The Budget created a headache for buyers last autumn, and this is the moment it really comes out in the figures.”
“Growth in new advances ground to a halt, but it’s important to remember they were still more than 15% higher than a year earlier after the largest rise in mortgage advances for five years in the previous quarter. This was something no one expected would be repeated.”
“It’s in the approvals figures that we see the big change this time and, of course, all fingers are pointing at the nervousness surrounding the November Budget, with rumours swirling of hefty tax rises. Buyers simply took their foot off the gas and bided their time.”
“We saw a strong rebound in December once the budgetary uncertainty was out of the way, and we’ll see how housing market activity shapes up in the first half of this year, given the interest rate uncertainty created by conflict in the Middle East.”
