The UK residential mortgage market showed strong signs of recovery in Q4 2024, marking a significant rebound from the contraction experienced in 2023.
With lending volumes increasing across residential, buy-to-let (BTL), later life, and equity release sectors, the outlook for 2025 suggests continued growth, albeit with challenges tied to economic uncertainty, regulatory reform, and evolving consumer behaviours.
Market performance overview
Below, we summarise the latest performance data across residential, BTL, later life, and equity release mortgage products in Q4 2024, drawing on data from both UK Finance and the Equity Release Council.
Mortgages
The residential mortgage sector experienced sustained growth in Q4 2024, driven by increased activity among first-time buyers (FTBs) and home movers.
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FTB numbers rose by 16.4% year-on-year, while home movers saw a 14.7% increase. This resurgence was partly fuelled by reductions in much-anticipated mortgage rates throughout the year and pre-emptive action in advance of the upcoming changes to Stamp Duty thresholds effective from April 2025.
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Despite this growth, overall activity remained below pre-2022 levels, highlighting the lingering effects of last year’s downturn.
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Refinancing activity contracted by 6% in Q4 2024, compared to Q4 2023 because fewer fixed-rate deals expired this year. However, with 1.8 million fixed-rate mortgages set to expire in 2025—400,000 more than in 2024—refinancing volumes are expected to rise significantly again this year.
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Lower interest rates during 2025 may further encourage borrowers to opt for external re-mortgaging rather than internal product transfers (PT).
Buy-to-Let
The BTL market demonstrated remarkable growth in Q4 2024, with 52,648 new loans advanced, totalling £9.6 billion—a year-on-year increase of 39.2% by number and 47.2% by value.
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The number of BTL fixed rate mortgages outstanding in 2024 was 4.4% up on Q4 2023, at £1.43m.
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Rental yields climbed to an average of 7%, up from 6.74% in Q4 2023, reflecting stronger profitability for landlords despite economic pressures.
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The average interest rate across all new buy-to-let loans in the UK was 5.09% in Q4 2024.
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The downwards movement in interest rates has improved affordability for landlords as the average interest cover ratio (ICR) for this period was 201%, up from 190% in Q1 2024.
Despite recent growth, the sector still faces structural challenges, including an ongoing supply-demand imbalance leading to rental inflation for would-be tenants.
2025 is expected to further challenges for BTL landlords as new rules and reforms are introduced via the Renters' Rights Bill announced in January 2025, offering greater security and stability for private renters. UK Finance anticipates that these challenges will lead to a modest contraction in purchase lending during this year.
Later Life
The later life lending sector also saw significant growth in Q4 2024, indicating increased activity among older borrowers.
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New loan volumes to older borrowers was up 28.2% year-on-year, with a total value of £5.6 billion (up 38.6%). Within this segment:
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5,700 new lifetime mortgages were advanced with a value of £510 million.
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Retirement interest-only mortgages also increased, with 343 new loans valued at £35 million (up 34.6% year-on-year).
Later life lending now represents 7.8% of all residential loans and 21.8% of all BTL loans, demonstrating its growing importance to the broader market.
Equity Release
The equity release market demonstrated positive momentum in Q4 2024, signalling increased interest among homeowners in unlocking equity from their properties.
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Total lending for the quarter reached £622 million, a 16% increase compared to Q4 2023, contributing to a total annual lending of £2.3 billion.
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More than 15,000 customers engaged with the market, reflecting renewed consumer confidence. Additionally, the average loan sizes for both drawdown and lump sum lifetime mortgages increased, bolstered by rising house prices.
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Notably, drawdown plans accounted for 56% of new facilities, suggesting a strategic approach among customers anticipating potential future rate reductions.
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Additionally, equity release product accessibility improved throughout 2024. The average APR of new products launched in October 2024 was down by 1% to 6.47%, according to data from Advise Wise.
The UK mortgage market growth is expected to continue in 2025 as lower interest rates ease borrowing pressures and boost affordability, and refinancing volumes increase.
However, expected rises in unemployment and slowing private sector growth could increase financial strain for both homeowners and landlords. When set against the context of increasing global economic uncertainty (recently fuelled by the introduction of US trade tariffs), and regulatory changes, these challenges may temper optimism.
Risk insights
Arrears
Arrears declined in Q4 across both residential and BTL mortgages with total cases falling by 2% quarter-on-quarter.
Ability to pay relies on the continuation of adequate income, predominantly income from employment. Loss of income, therefore, is consequently the largest cause of arrears, alongside divorce and bereavement. The low unemployment rates experienced in Q4 2024, coupled with reduced cost pressures during 2024 are expected to have driven the overall reduction in arrears during this time.
In 2025, arrears are expected to remain on a downward path. However, risks tied to potential labour market weakness could challenge this trajectory later in the year.
Possessions
Mortgage possessions rose sharply in percentage terms but remain historically low overall.
There was a rise of 42% in possessions year-on-year from Q4 2023 to Q4 2024. While BTL possessions were up nearly 30%, comparatively.
These increases are believed to reflect a gradual normalisation from post-pandemic lows rather than widespread financial distress.
For lenders, managing possessions effectively will require enhanced operational efficiency and borrower engagement strategies.
Tech enabled risk management
To capitalise on these opportunities while mitigating risks, lenders can leverage the benefits of digital tools made available via mortgage lending software, including:
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Proactive risk management: Predictive analytics can help lenders identify early signs of borrower distress and implement tailored interventions before arrears escalate.
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Streamlined refinancing processes: Automation tools can simplify refinancing workflows, ensuring faster approvals and improved customer experiences.
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Enhanced portfolio monitoring: For BTL lenders managing complex portfolios, centralised data platforms can provide real-time insights into landlord performance and profitability.
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Customer engagement: Broader choice in digital and non-digital communication channels that suit your customers' needs can improve borrower interactions during refinancing or arrears management processes.
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Regulatory compliance: Automated compliance systems ensure adherence to evolving regulations while reducing administrative burdens.
Concluding thoughts
Q4 2024 marked a turning point for the UK mortgage market as growth resumed across residential and BTL sectors.
Looking ahead to 2025, lenders face both opportunities and challenges that will require agility and innovation to navigate successfully. By embracing technology-driven solutions, lenders can enhance efficiency, mitigate risks, and position themselves for sustained growth in an increasingly competitive landscape.
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