A modest year-on-year increase in mortgage applications is a sign of residual momentum in the housing market after the stamp duty deadline, but affordability remains ‘very stretched’, according to the latest Household Finance Review from UK Finance.
The report reveals an expected surge in mortgage lending in the first quarter of 2025, driven by homebuyers seeking to complete purchases before changes to stamp duty took effect in April. The scramble to buy at the more generous allowances triggered a 62% increase in first-time buyer completion numbers and a 74% rise in home mover completions.
Quarterly first time buyer and homemover completion numbers:
| First time buyers | Homemovers | |
| Q1 2024 | 66,250 | 54,640 |
| Q1 2025 | 107,000 | 94,450 |
| Year on year change | + 62 per cent | + 74 per cent |
Source: UK Finance
March first time buyer and homemover completion numbers:
| First time buyers | Homemovers | |
| March 2024 | 24,070 | 19,720 |
| March 2025 | 51,180 | 47,360 |
| Year on year change | + 113 per cent | + 140 per cent |
Source: UK Finance
But the banking trade association warns that affordability remains an issue, with payments taking up ‘a much higher proportion of income now than at any point since the peak of the global financial crisis’. The report notes:
“Borrowers continue to take longer mortgage terms to help manage affordability pressures, especially first-time buyers. The average first-time buyer mortgage term is now 31 years as of March, compared with 28 years in March 2015.
“The increase in the average term has been driven primarily by a significant increase in borrowing over a 40-year period, typically the maximum allowed under lenders’ policies. The amount spent by first time buyers on mortgage payments relative to their income is also high. Even as interest rates have come down, this measure of affordability has not eased significantly, with rising house prices largely offsetting any lowering of payments through falling rates.”
As well as taking out longer terms, first-time buyers are relying heavily on help from parents. An ‘unintended consequence’ of the stamp duty changes was ‘customers doing all they could to borrow more, and ahead of the deadline, to take advantage of the tax break’, UK Finance said in the report.
“Although we expect growth in purchase activity this year, it is clear that borrowers are more stretched now than they have been since the global financial crisis. Parental help is a major and necessary source of funding for many new homebuyers, but those not fortunate enough to have families in the position to help face even more significant challenges in accessing homeownership.”
The report notes that although the outlook is for further improvement through the year, the wider economy remains in uncertain territory and risks remain, including from unemployment – historically the key driver of payment difficulties.
Eric Leenders, managing director of personal finance at UK Finance, said of the findings:
“While these are signs of growing financial resilience, the challenges many households face, particularly around affordability, remain. Anyone worried about their mortgage or financial situation should speak to their lender early to explore the support available.”
Toby Leek, NAEA Propertymark president, commented:
“As we head into the summer months, it remains a case of all eyes on the Bank of England regarding the directions of travel on the base rate over the coming months and how this might translate into lenders bringing potentially more competitive mortgage products to the market.”
