Mortgage Industry Overview: June 2025

As we move into the summer, the mortgage industry continues to evolve in response to macroeconomic developments, shifting consumer behaviour, and regulatory changes. Understanding these dynamics is crucial, not only for making sound decisions but for staying ahead in a market that remains full of both challenges and opportunity.

Rural Resurgence

Recent data from Nationwide highlights a compelling trend: house prices in predominantly rural areas have outpaced those in urban locations over the past five years, rising by 23% compared to 18% in cities and towns. Rural terraced properties, in particular, have seen the strongest gains, while urban flats have experienced the lowest levels of growth.

House Price Growth Continues

Annual house price growth reached 3.5% in May, up from 3.4% the previous month, with a 0.5% rise month-on-month. The average UK house price now sits at £273,427. This growth came despite the economic uncertainty, indicating that underlying fundamentals (low unemployment, wage growth, and improving borrower attitude) remain supportive.

The market is still very much alive. While not booming, there is consistent activity particularly among owner-occupiers. Residential property completions in March were at their highest since June 2021, largely due to buyers bringing forward purchases ahead of the stamp duty threshold reduction.

Stamp Duty Changes Drive Activity

Q1 saw a surge in mortgage completions, especially among first-time buyers (up 62%) and home movers (up 74%). This activity peaked in March as buyers rushed to beat the reduction in stamp duty thresholds. While that artificial boost may not be sustained, residual momentum has continued into Q2.

However, affordability continues to be stretched. With interest rates being held at 4.25% by the Bank of England, rising house prices have eroded the benefits of cheaper borrowing. Many are extending mortgage terms to lower monthly costs, but these longer terms still consume a higher share of income than at any point since the 2008 financial crisis.

Clear guidance on affordability assessments, product options, and longer-term financial planning is more important than ever within the industry. First-time buyers face additional challenges with larger deposit requirements and higher upfront costs due to the new stamp duty thresholds. Growing interest in 100% mortgages and family-assisted solutions is expected, especially as more providers relax affordability rules to support new entrants to the housing market.

Remortgage Transition

Nearly half a million fixed-rate deals are set to mature this year, and many will be transitioning off low, pandemic-era rates. While Q1 saw a 13% drop in remortgage activity, a reversal is expected as lower rates filter through, and affordability improves.

Demand for proactive refinancing strategies, whether via product transfers or open market remortgages, is poised to increase. If the FCA’s proposals to simplify switching come into effect, this would open up further choice and flexibility in the mortgage market.

Signs of Mortgage Industry Stability

The number of mortgages in arrears over 2.5% of balance fell to just under 102,000, a 3% drop from the previous quarter. While possession numbers rose by 68% year-on-year to 2,030 in Q1, this was from a very low base, and the overall trend remains stable.

The trend suggests borrower resilience is improving. Most households continue to manage repayments well, but as fixed-rate periods end, proactive budget reviews and early action will be key to helping those facing new financial pressures avoid difficulty.

Preparing for H2

Affordability remains a defining challenge, particularly for first-time buyers. Following in the footsteps of Skipton’s Track Record product, launching in May 2023, April Mortgages recently announced its own 100% mortgage. We’re yet to see the broader impact of this development or whether it will prompt other lenders to re-enter this part of the market, but it’s a promising sign for the mortgage industry.

Despite the complexity, the underlying message remains clear: this is an industry adjusting to new realities, not withdrawing. Those who remain responsive to changing conditions and focused on long-term needs will continue to find opportunities ahead.

Mortgage Intelligence is here to help you find those opportunities.

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