Mortgage applications rose in the second quarter of 2025, signalling that we’re set for a busy few months of completions, Bank of England data shows.
The value of new mortgage commitments increased by 14.6% from Q1 to £78.2 billion, the highest since 2022 Q3.
Completed mortgage lending saw an expected drop in Q2, highlighting the distorting nature of alterations to stamp duty.
From 1 April the stamp duty was once again charged at 2% from £125,001 to £250,000, 5% on from £250,001 to £925,000, 10% on the amount from £925,001 to £1.5 million, and 12% on any amount over £1.5 million. Buyers of investment properties are subject to a 5% surcharge.
Simon Gammon, managing partner, Knight Frank Finance, said: “Mortgage lending remains subdued, with gross advances down sharply in the last quarter. But the forward-looking indicators tell a different story.
“New commitments are rising strongly, and the share of high loan-to-value lending has climbed to its highest level since 2008. That suggests lenders are targeting the buoyant first-time buyer market, which has become key to gaining market share.
“Interestingly, lending at higher loan-to-income ratios fell, and this is where some larger lenders are seeking to gain an edge on competitors. HSBC, for example, has moved to 5.5 times salary for first-time buyers—showing that competition is robust even as overall volumes remain weak.”
New arrears cases dropped by 0.4% to 8.8% in Q2, the lowest rate since Q1 2022.
Gammon added: “Encouragingly, arrears continue to ease. New arrears cases are now at their lowest since 2022, reflecting how well post-financial crisis regulations have worked through this cycle’s spike in interest rates.
“Forbearance has also played an important role – many lenders have been willing to offer measures such as capital repayment holidays, which have helped borrowers weather the transition from ultra-low to higher mortgage rates.
“Taken together, this data suggests the system has worked: we’ve had a stress test of higher rates, arrears are coming down, and activity looks set to pick up.”
