Mortgage Forecast UK 2025 | The UK mortgage market is expected to see a modest but steady recovery throughout 2025. Signs of economic stability and reduced financial pressures are slowly restoring borrower confidence.
According to recent data from UK Finance, mortgage affordability is set to improve across the year. This trend is likely to support increased demand and healthier levels of mortgage lending.
The gradual return of stability may help more first-time buyers meet deposit requirements and secure lending on favourable terms. Improved affordability could also lead to stronger movement within the home mover segment.
While interest rates are not expected to fall sharply, any reduction will be welcome news to potential borrowers. Fixed-rate products may continue to offer some protection against market fluctuations.
Lenders are forecasted to maintain a cautious but supportive approach that aligns with UK lending regulations. Borrowers with steady income and manageable debt levels are likely to benefit.
House prices are expected to remain stable, helping maintain lender confidence and encouraging gradual market growth. Borrowers should still conduct affordability checks before applying.
Buy-to-let lending may also moderately rise, especially where rental yields are favourable, and tenant demand remains high. However, stricter stress testing will still apply.
Overall, 2025 may offer improved borrowing conditions, supported by consistent lending policies and renewed market confidence. Cautious optimism appears to be returning to the UK mortgage sector.
Forecasting the following for 2025:
| Gross Lending | £260 billion | +11 percent |
| Lending for house purchase | £148 billion | +10 percent |
| External remortgaging | £76 billion | + 30 percent |
| New buy to let purchase lending | £9 billion | -7 percent |
| Internal product transfer | £254 billion | +13 percent |
| Arrears | 99,000 | -5 percent |
2024 Market Overview: Key Trends and Figures
In 2024, the housing market began to recover as falling inflation and rising real incomes eased affordability pressures. A gradual reduction in mortgage rates also contributed to this improvement, encouraging more home purchase lending. However, refinancing activity stayed weak, reflecting continued caution among homeowners and lenders alike.
Cautious lending, strong lender support, and steady employment helped mortgage arrears remain under control throughout the year. The number of borrowers missing payments peaked in early 2024 and has since decreased. Property repossessions have risen slightly, mostly due to older arrears cases moving through legal processes. Repossession levels still remain far below long-term historical trends.
2024Year on year change compared to 2023
| Gross Lending | £235 billion | +4 percent |
| Lending for house purchase | £135 billion | +11 percent |
| External remortgaging | £59 billion | -10 percent |
| New buy to let purchase lending | £10 billion | +13 percent |
| Internal product transfer | £224 billion | -7 percent |
| Arrears | 104,200 | -3 percent |
Credit: UKFinance
Mortgage Forecast UK 2025 | Easing Costs and Declining Rates Offer Renewed Opportunities
Following a period of high interest rates and inflation, 2025 is expected to bring some relief for UK homeowners.
Falling mortgage rates, supported by improved monetary conditions and lower inflation, should make borrowing more accessible.
This reduction in borrowing costs will likely benefit prospective buyers and those with existing mortgage arrangements.
As monthly repayments ease, homeowners may find their household finances less strained.
This shift is expected to create a more stable and affordable lending environment across the UK property market.
Mortgage Forecast UK 2025 | Arrears Expected to Decline with Supportive Measures in Place
With affordability improving, fewer borrowers are expected to fall behind on their mortgage payments this year. Lenders are continuing to provide tailored forbearance measures and offer personalised support to those experiencing financial challenges. As a result, mortgage arrears are forecast to decline steadily throughout the year.
The mix of lower interest rates and lender-led support is strengthening the mortgage market’s overall stability. Lenders are working directly with borrowers to address payment issues early and sensitively. This approach lowers the risk of persistent arrears and helps more households remain in their homes.
Mortgage Forecast UK 2025 | Sustained Growth on the Horizon
While the market recovery in 2025 may not be sharp, steady signs of improvement remain encouraging across the mortgage industry.
With stronger economic fundamentals and improving consumer confidence, home purchases and refinancing activity are expected to increase gradually.
The outlook suggests a more stable and predictable environment, backed by responsible lending and improved mortgage affordability.
Support for borrowers remains a focus, helping those struggling with higher rates or seeking a better mortgage deal.
Attention will remain on how lending growth performs across key groups: first-time buyers, home movers, remortgages, and landlords.
Market activity is likely to vary, but expectations are growing that momentum will build in the months ahead.
After recent challenges, there is now a cautious sense that the mortgage sector is entering a more promising phase.
Buy-to-let Lending UK
Buy-to-let (BTL) lending in the UK is projected to decline modestly in 2025. New purchase lending may fall to £9 billion, down from £10 billion in 2024—a 7% reduction. This reflects persistent sector challenges such as stricter affordability rules, evolving landlord regulations, and higher costs linked to taxation and compliance.
Although BTL may not recover at the pace of residential lending, there are still prospects. Informed investors focusing on long-term capital growth, or those adapting to regulatory changes, can still find value.
In the current market, mortgage brokers hold a key role. They assist landlords and investors in making well-informed and compliant borrowing decisions.
Thank you for reading our “Mortgage Forecast UK 2025 | UK Mortgage Market Forecast” publication. Stay “Connect“-ed for more updates soon!
