UK Mortgage Market Trends: Five Years of Change
The UK mortgage market has always had its ups and downs, but the last five years have been more like a rollercoaster ride than a gentle incline. Since early 2020, homeowners, buyers and lenders have contended with extraordinary events: a world-shaking pandemic, a historic low-rate environment, a sudden spike in inflation and the steepest surge in interest rates in decades. Factor in a cost-of-living crisis and shifting government policies, and it’s been a period of constant recalibration.
For anyone attempting to buy, sell, or even just make it through their monthly repayments, these shifts have been impossible to ignore. The way we borrow has changed, the products available to us have changed, and even the willingness of lenders to take on risk has changed.
In this article, we’ll chart the status of the residential mortgage market through 2020 and into early 2025. All numerical figures referenced in this report are sourced directly from the Bank of England’s Mortgage Lenders & Administrators Return (MLAR) dataset Q1 2025 release. Using these hard figures, we show how borrowing has surged and faltered, and what this means for buyer habits and lender attitudes.
The Bigger Picture – Outstanding Mortgage Debt Growth
The most explicit indication of how the mortgage market has shifted can be seen in the overall stock of debt. Outstanding residential mortgage loans were £1.509 trillion in Q1 2020. By Q4 of that year, it had risen slightly to £1.541 trillion, despite months of national lockdown. Five years later, in Q1 2025, the figure has grown to £1.698 trillion.
By the numbers, that appears to be continued growth, but the path has not been easy. The largest wobble was in 2023, down from £1.674 trillion in Q1 to £1.656 trillion in Q4. This downturn was driven not only by a deceleration of new borrowing as higher interest rates chewed into affordability, but also by borrowers repaying more loans faster.
Why did mortgage debt somehow keep climbing over all those obstacles? A few reasons stand out:
- House price growth: The price of buying a UK home remained high, even when times were tough, so buyers still needed big loans.
- Cheap borrowing (early 2020s): With interest rates at rock bottom, people borrowed more while costs were low.
- Underlying demand: People still need a place to live when things fall apart. Whether upsizing, downsizing, or buying for the first time, demand kept pressure on the lending system.
The appetite for housing was quite strong, despite pandemic restrictions and financial headwinds.
Lending Activity – Gross Mortgage Advances
If outstanding balances show the long-term picture, gross mortgage advances highlight the short-term surges and slowdowns.
The numbers paint a vivid picture:
- High points: Q4 2020 recorded advances of £76.6bn, climbing to a five-year high of £83.2bn in Q1 2021 as the post-lockdown boom and stamp duty holiday fuelled demand. But there was a strong bounce back in Q1 2025 at £77.6bn.
- Low points: 2023 was brutal. Lending fell to £58.6bn for the first quarter, and £52.9bn for the fourth, highlighting the impact of higher mortgage rates immobilising many potential purchasers.
The swings show how much mortgage lending can react to changes in policy and mood. Buyers clamoured to the table when stamp duty cuts were on the menu. Activity declined after the Bank of England raised rates to curb inflation.
Behind the numbers are very different experiences for borrowers:
- It was first-time buyers who struggled most in 2023, priced out of the market by having to pay more each month to service their loan.
- Home movers put off decisions, waiting to see which way rates would land.
- Recourse was limited for remortgagers, who sought new loans, often at rates significantly higher than those previously available.
The recent rebound in 2025 suggests that confidence is beginning to return; however, it remains a weak indicator of confidence. Instead of diving headfirst, many buyers are testing the waters of affordability once again, albeit cautiously.
Future Intentions – New Mortgage Commitments
Gross advances indicate loans that were actually made, but commitments give us a sense of the pipeline of lending to come. And here the numbers are just as astonishing.
In the height of the pandemic boom, commitments in Q4 2020 reached £87.7bn as agreed deals surged, with buyers racing to capitalise on low rates and tax breaks. By contrast, 2023 was the low point, with Q1 commitments dropping to £45.8bn. That was nearly half the level from three years earlier.
Why the fall? Confidence dried up. Higher monthly costs deterred buyers, and lenders made the affordability checks more stringent in case borrowers ran into difficulties.
Commitments had climbed back to £68.2bn by Q1 2025. This is evidence that buyers are coming back and that lenders are confident about lending again. Though less frenzied than in 2020-2021, it’s a sign of things stabilising.
These commitments are worth watching because they are what’s called a leading indicator. Lending often follows when they do. An increase in 2024-2025 suggests a more robust pipeline through the remainder of the year.
Risk Appetite – High Loan-to-Value Lending (90%+ LTV)
A second useful lens on the mortgage market is the loan-to-value (LTV) ratio. High LTV mortgages, where borrowers make a low down payment, are critical for first-time buyers. But they are also riskier for lenders.
The data tells a story of caution, then recovery:
- Q1 2020: 5.2% of advances were 90%+ LTV.
- Q4 2020: That number plummeted to 1.2% as lenders withdrew products in response to pandemic uncertainty.
- Gradual recovery: By Q4 2023, high-LTV loans accounted for 5.5%.
- Q1 2025: The share reached 6.7% for the first time this decade as 90%+ LTV lending increased compared to the previous quarter.
This matters for two reasons. First, it implies that lenders are more confident about the stability of house prices and the borrowers’ capacity to withstand an adverse economic shock. Second, more first-time buyers have access to the market again, supported by building societies and niche lenders coming back into the high-LTV space.
Of course, there’s a downside. Higher LTV lending is systemic riskier if house prices fall or the economy weakens. It’s a delicate balancing act between helping new buyers and protecting financial stability.
Year-by-Year Analysis – Key Shifts and Drivers
2020 – Pandemic and Policy Support
The housing market has gone from standstill to stampede. Lockdowns froze activity early in the year, but the stamp duty holiday unleashed demand. Low rates made borrowing affordable and prompted people to reevaluate their homes, leading to moves to larger properties and greener pastures.
2021 – Post-Lockdown Boom
This was the year of frenzied activity. Gross advances set all-time highs, and competition for homes was fierce. Urban flats were exchanged for suburban houses with gardens by many city-dwellers. Lenders, buoyed by government support and a robust jobs market, were eager to keep the deals coming.
2022 – Inflation Surge and Rate Hikes
The mood shifted. As inflation spiked, the Bank of England started to raise rates. Borrowing costs surged, and households felt the pain. Buyers grew more cautious, but lending held up reasonably well, as some rushed to lock in fixed rates before costs rose any higher.
2023 – Affordability Crisis and Lending Contraction
The crunch hit hard. Rising mortgage rates, skyrocketing bills and the general squeeze on cost-of-living put affordability top of the list. Lending volumes were significantly reduced, and high-LTV products were scarce. And many potential movers just stayed where they were, waiting for smoother waters.
2024 – Market Stabilisation
Things began to level out. Inflation began to decline, and although rates remained at record highs, consumers adjusted accordingly. Lenders resumed the products, and commitments increased. Buyers dipped a toe back into the market, but activity remained far below the peaks of 2020-2021.
2025 – Early Recovery Signs
The most recent data are cause for cautious optimism. Advancements and the number of commitments are increasing, and high-LTV lending is at its highest level in five years. Buyers appear more willing to take the plunge, and lenders are growing more confident. It’s not boom territory, but it feels like a recovery phase.
What This Means for the Market Ahead
In a retrospective of five years of change, there is one theme: Resilience. The British mortgage market has withstood a pandemic, surging inflation and a huge interest rate rise. Lending ebbed and flowed but never completely dried up.
Entering Q1 2025, the market is transitioning to a new stage. Borrowers are adapting to the “new normal” of higher rates, lenders are reinstating higher-LTV products, and commitments have been indicative of healthier lending pipelines. The mood is cautiously optimistic.
That said, risks remain. If inflation proves persistent or rates stay higher for longer, affordability will continue to be stretched. And although an increasing number of high-LTV loans help first-time buyers, they also leave households more exposed to changes in house prices.
For property professionals, the trick is to look at the early indicators, commitments and LTV shares, components which show the change in sentiment before the big numbers move. For buyers, the moral of the story is clear: while the climate remains difficult, there are greater prospects now than there were two years ago.
The last five years have proved that the housing market never really stands still. Demand shapes up, lenders get in line, and policy can have a lot to say about the outcomes. As we move into the latter part of 2025, the information suggests that we are no longer contracting but are, on balance, cautiously creeping back into growth territory.
Please be aware that by clicking on to the above links you are leaving Mortgaged website. Please note that Mortgaged nor HL Partnership Limited are responsible for the accuracy of the information contained within the linked site(s) accessible from this page