Wednesday, 9 September 2026
The UK mortgage market strengthened considerably during the second quarter of 2026, with lending volumes rising sharply and mortgages requiring smaller deposits accounting for their largest share of new lending in almost two decades.
Gross mortgage advances reached £77.4 billion in Q2, an increase of 11.1% from the previous quarter and 31.7% from the same period of 2025, according to the Financial Conduct Authority. Total outstanding residential mortgage balances increased to approximately £1.761 trillion, 3.1% higher than a year earlier.
The increase in completed lending was considerably stronger than the movement in new mortgage commitments. Commitments reached £79.2 billion, rising 1.4% quarter-on-quarter and 1.3% annually. The difference suggests that the surge in advances should not automatically be interpreted as an equivalent acceleration in future housing transactions.
One of the clearest changes was the increasing proportion of lending at higher loan-to-value ratios. Mortgages exceeding 90% of a property’s value accounted for 8.4% of gross advances, the highest share since the second quarter of 2008. Lending above 75% LTV represented 47.5% of advances, reaching its largest proportion since the fourth quarter of 2007.
Higher borrowing relative to household income also became more prevalent. The FCA’s measure of high loan-to-income lending increased to 46.0% of advances, rising 0.9 percentage points during the quarter and 4.6 percentage points compared with Q2 2025.
The figures are significant for the residential property market because deposit requirements remain one of the principal barriers facing households attempting to buy homes. A greater proportion of high-LTV lending potentially expands the financing options available to buyers with sufficient income to service a mortgage but limited capital for a large deposit. The FCA statistics, however, do not establish that lenders have generally relaxed their underwriting requirements.
Despite the increase in higher-leverage mortgages, first-time buyers did not take a larger share of overall lending. They accounted for 27.3% of gross advances, slightly below both the previous quarter and the equivalent period of 2025. Home movers represented 28.8%, while mortgages used for owner-occupied purchases accounted for 56.1% of advances.
Refinancing became a more important part of activity. Owner-occupier remortgages increased to 31.2% of gross advances, up 3.1 percentage points from Q1 and the highest proportion since early 2024. This indicates that a meaningful part of the increase in mortgage volumes came from existing homeowners arranging new financing rather than from property purchases alone.
Buy-to-let lending moved in the opposite direction. Its share of gross advances declined from 8.9% in the first quarter to 8.0% in Q2, the lowest level since the third quarter of 2024 and 1.2 percentage points below a year earlier.
The decline does not demonstrate on its own that landlords are withdrawing permanently from the UK housing market, but it does show owner-occupied and refinancing activity taking a greater proportion of mortgage flows. If sustained, the divergence will be important for the relationship between homeownership and the privately rented housing sector.
There was also encouraging evidence on existing mortgage performance. Balances in arrears declined 1.9% during the quarter to approximately £19.7 billion, leaving them 7.3% below their level a year earlier and at their lowest since the third quarter of 2023. Arrears represented around 1.1% of outstanding mortgage balances.
Repossession activity also decreased. There were 2,058 new possessions during Q2, 7.1% fewer than in the previous quarter and 15.6% below the corresponding period of 2025. The stock of properties in possession declined 4.5% to 8,825.
For developers and residential investors, the figures present a more nuanced market than the headline increase in lending might suggest. Mortgage finance is flowing at substantially higher volumes than a year ago and higher-LTV products are accounting for a growing proportion of activity, while arrears and possessions are moving lower. At the same time, first-time buyers have not increased their share of lending, buy-to-let activity has weakened and new mortgage commitments are growing much more slowly than completed advances.
The next test for the UK residential market will therefore be whether the growing use of higher-LTV mortgages translates into sustained purchasing demand. If it does, the financing environment could provide additional support for transactions and new-build sales. If much of the current increase reflects refinancing and previously agreed mortgages reaching completion, the underlying recovery in housing demand may prove more moderate than the headline lending figures initially indicate.
Source: FCA Q2 2026 Mortgage Lending Statistics
