Mortgage lending reached its highest level since the pandemic in 2025, with 720,000 house purchase loans granted - up 16.3 percent on the previous year. First-time buyer lending surged even faster, rising 18 percent to 391,000 loans, according to UK Finance’s latest Household Finance Review.
First-time buyers drive market recovery
The first quarter saw a rush of activity as buyers sought to complete before stamp duty changes in April 2025. Lending then settled to just above normal levels for the remainder of the year, supported by innovative products designed to widen access for first-time buyers.
However, affordability remains stretched. First-time buyers spent an average of 22.1 percent of gross income on initial mortgage payments in Q4 - close to the peak levels seen in 2023. The FCA’s July revision of lending rules widened access to credit but has not resolved underlying affordability pressures.
Refinancing activity strengthened in the second half, with 511,000 loans advanced in Q4 - up 25 percent on the same period in 2024. Internal product transfers remained the most popular choice for borrowers coming off fixed rates.
This follows today’s Nationwide data showing buy-to-let activity edging higher, suggesting both owner-occupier and investor markets are recovering in tandem.
Mortgage arrears fall for seventh consecutive quarter
The number of mortgages in arrears fell to 90,050 in Q4 2025 - the seventh consecutive quarterly decline. The continued improvement suggests households are managing higher rates better than feared, despite affordability constraints.
Consumer finances showed further resilience. Only 47.6 percent of credit card balances carried outstanding interest - a record low - while overdraft debt remained at historically low levels with few signs of financial difficulty.
Eric Leenders, managing director of personal finance at UK Finance, said: “The mortgage market saw strong growth in 2025, with lending reaching its highest level since the pandemic and first-time buyer numbers supported by innovative products to widen access.”
Leenders added: “Affordability remains tight despite regulatory easing, but the continued fall in arrears is reassuring, and gradually easing rates should help support borrowers in the year ahead.”
The findings align with Zoopla data showing rent growth slowing as improved mortgage affordability enables more tenants to become first-time buyers, easing pressure on the rental market.
What this means for landlords
- First-time buyer competition: The 18% surge in FTB lending means more tenants leaving the rental market - good for reducing demand pressure but also for landlords looking to sell.
- Refinancing window: With 25% more refinancing in Q4, landlords approaching fixed-rate expiry should shop around - competition among lenders is intensifying.
- Arrears risk easing: Seven consecutive quarters of falling mortgage arrears suggests tenant finances are stabilising, potentially reducing rent arrears risk.
- Watch for: More borrowers coming off fixed rates in 2026 will drive further refinancing activity - and potentially distressed sales if affordability bites.
- Bottom line: A healthier mortgage market benefits everyone. Rising FTB activity absorbs former renters while improving lending conditions help landlords refinance.
Editor’s view
The 18 percent jump in first-time buyer lending is good news for landlords in two ways. First, it absorbs tenants who might otherwise compete for scarce rental stock. Second, it signals a healthier property market where landlords can sell to owner-occupiers if needed. The real story here is arrears: seven quarters of consecutive falls suggests the rate shock has passed without mass defaults. That’s the foundation a stable market needs.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 2 March 2026
Sources: UK Finance Household Finance Review Q4 2025
Related reading: House prices hold steady as BTL activity edges higher
