Robust Real Estate Sector Experiences Three-Year High in First Half of 2025
Boost in UK Housing Market: Mortgage Lending and Property Transactions on the Rise
The UK housing market is experiencing a significant revival, with mortgage lenders loosening their affordability rules and the government introducing supportive initiatives [1]. This combination is broadening access to mortgages, particularly for first-time buyers and remortgage customers, and increasing the availability of higher loan-to-value (LTV) products.
One of the key effects of these changes is the increased availability of high LTV mortgages. The government's new Mortgage Guarantee Scheme insures lenders against losses on 91-95% LTV mortgages, making these loans more attractive and helping buyers with smaller deposits [1].
First-time buyers are also benefiting from lowered income thresholds. Eligibility income requirements have been reduced, allowing more buyers to qualify for popular products like Nationwide’s ‘Helping Hand’ mortgage, estimated to assist an additional 10,000 buyers annually [2].
Eased affordability assessments are another factor driving the market surge. The Financial Conduct Authority (FCA) has relaxed rules, including the removal of mandatory full affordability assessments when reducing mortgage terms or remortgaging where the new deal is more affordable [1][3][5]. There is also a growing acceptance of rent payment history as proof of affordability and more tailored affordability assessments, especially for self-employed or irregular income borrowers [4].
Reduced regulatory red tape is another contributing factor. The FCA has reformed interaction rules, removing the “interactive dialogue” advice trigger for certain mortgage transactions, reducing delays and costs for consumers engaging mortgage providers [1][3].
However, these changes have raised concerns about potential increases in mis-selling risks and consumer complaints if affordability standards are not carefully managed. The FCA plans ongoing monitoring to mitigate such risks [4][5].
In the first half of 2025, property transactions hit a three-year high, with an average of 63,866 mortgages approved each month. This surge was partly due to buyers rushing to complete transactions before the stamp duty hike in April [6]. Despite the decrease in the nil-rate threshold from £250,000 to £125,000 on April 1, the number of new mortgages approved remained consistently strong after the deadline [7].
The average two-year fixed-rate deal currently stands at 5%, and the average five-year deal is 5.01%, according to rate scrutineer Moneyfacts [8]. House prices in July had their biggest monthly rise of the year so far, with the average price going up by 0.4% to £298,237 [9]. This increase in house prices is attributed to mortgage rates continuing to fall and banks offering bigger home loans.
With these changes, the property market in the first half of 2025 was the strongest since 2022. Despite a slight dip in June, with 93,530 property transactions, the overall trend remains positive, indicating a promising future for the UK housing market.
References:
- The Guardian
- Nationwide Building Society
- Financial Conduct Authority
- Mortgage Strategy
- The Telegraph
- HMRC
- Bank of England
- Moneyfacts
- Halifax
- The increased availability of high LTV mortgages, supported by government initiatives like the Mortgage Guarantee Scheme, is leveraging technology to create more accessible finance opportunities for buyers with smaller deposits.
- The UK housing market surge, driven by changes such as eased affordability assessments and reduced regulatory red tape, is also influenced by technological advancements that streamline mortgage transactions and expand the market for property purchases.
