Mortgage lending activity returned to growth in Q3, the latest Household Finance Review from UK Finance reveals. Refinancing also increased, with volumes up nearly 50% year‑on‑year.
Lending is now around the stable levels seen in 2022, with forward‑looking data analysed by UK Finance suggesting growth continued into October before flattening in November.
Affordability remains ‘very tight’, according to the report, with first-time buyers spending around 22% of gross household income on monthly mortgage repayments. Recent regulatory changes have improved access to the market, with 11% more first-time buyer loans approved in Q3 than a year previously.
More borrowers are increasing loan terms to manage affordability, resulting in an increase in higher loan‑to‑income borrowing, but some groups remain limited in the types of products they can access. UK Finance suggests furtehr modest adjustments to regulations could widen access for those who don’t qualify under current rules, such as the self-employed.
“While mortgage activity has picked up, the market remains finely balanced,” Mary-Lou Press, president of NAEA Propertymark said.
“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.”
