Mortgage Market round-up Q1 2026

The UK mortgage market began 2026 in reasonably resilient shape given events in the global economy. While completed lending fell from the previous quarter, new mortgage commitments increased and remortgaging gathered pace. Against a backdrop of mixed borrowing-cost trends and continued economic uncertainty, lenders and borrowers tended to adopt a more measured approach to the market.

Market performance overview

Below, we summarise the latest performance data across residential, BTL, later life, and equity release mortgage products in Q1 2026, drawing on data from the FCA, Prudential Regulatory Authority, UK Finance and the Equity Release Council.

Mortgages

According to the FCA's latest data, the residential mortgage market showed mixed signals in Q1 2026.

Gross mortgage advances fell 12.3% quarter-on-quarter to £69.6bn, although the value of new mortgage commitments rose 11.5% to £78.0bn.
First-time buyers accounted for 27.4% of all gross advances for owner-occupied house purchases, while home movers represented 30.3%. Both shares were lower than in the previous quarter, reflecting a shift towards remortgaging rather than house purchase activity.
Remortgaging increased to 28.1% of all gross advances, its highest share for some time, as more borrowers refinanced existing loans.

Buy-to-Let

According to UK Finance's latest data, the buy-to-let (BTL) market also showed resilience in Q1 2026, with lending higher than a year earlier and affordability continuing to improve as average interest rates eased.

There were 58,272 new BTL loans advanced in Q1 2026, worth £10.8bn. This represented a 3.3% increase in the number of loans and a 7.0% increase in their value compared with Q1 2025.
BTL rental yields continued to strengthen, with the average gross rental yield rising to 7.21%, up from 6.93% a year earlier.
Lower borrowing costs helped push the average BTL interest cover ratio (ICR) up to 221%, compared with 218% in the previous quarter and 204% a year earlier.
The number of fixed-rate BTL mortgages outstanding increased to 1.47m, up 1.4% year-on-year, while the number of variable-rate loans continued to decline, reflecting landlords' ongoing preference for payment certainty.

Later Life

Later life lending remained a significant part of the mortgage market in Q1 2026, although activity was more subdued than a year earlier as borrowing among older homeowners eased from the higher levels seen in 2025.

According to the latest UK Finance data, 36,050 new loans were advanced to borrowers aged 55 and over during the quarter, down 4.8% year-on-year. However, the total value of lending remained stable at £6bn, 0.3% higher than in Q1 2025.

Equity Release

The equity release market experienced a more subdued start to 2026, with economic uncertainty prompting many homeowners to delay borrowing decisions.

According to the Equity Release Council's latest data, total lending reached £574m in Q1 2026, representing a 9% decline on the previous quarter and a 14% decrease compared with Q1 2025.

12,958 new and returning customers accessed housing wealth during the quarter, down 7% on Q4 2025 and 10% year-on-year.
New plan volumes fell to 4,868, while returning drawdown customers proved the most resilient part of the market, declining by just 2% compared with the previous quarter.
Average loan sizes reduced across most product types, reflecting a more cautious borrowing environment as providers maintained tighter loan-to-value limits and higher borrowing costs.

Risk insights

Arrears

Mortgage arrears continued to improve during Q1 2026, alongside lower borrowing costs in some parts of the market and improved affordability measures, particularly within the buy-to-let sector. This continued the downward trend in arrears seen during the second half of 2025.

The value of residential mortgage balances in arrears fell again during the quarter, reaching its lowest level since Q3 2023, while the number of borrowers with larger arrears also continued to decline.
In the buy-to-let sector, 8,960 mortgages were in arrears of more than 2.5% of the outstanding balance at the end of Q1 2026, 6% fewer than in the previous quarter (UK Finance).

Possessions

Mortgage possessions remained relatively low during Q1 2026, although lenders continued to manage a steady flow of cases as some borrowers remained under financial pressure.

The number of new possessions in 2026 Q1 increased by 1.6% from the previous quarter to 2,216, but remained 4.3% lower than a year earlier.
The total stock of possessions decreased by 0.8% from the previous quarter to 9,247, the first decrease since 2021 Q1, but remained 20.6% higher than a year earlier (UK Finance).

Concluding thoughts

Although completed lending eased from Q4 2025, rising mortgage commitments indicate that underlying demand remains healthy. Improving arrears, possession levels that remain relatively low and improving affordability in parts of the market are also positive indicators. The outlook for the remainder of 2026 will clearly depend largely on the direction of interest rates and the wider economy.

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