Stonebridge’s quarterly Mortgage Market Index reported that year-on-year mortgage applications from first-time buyers were down 18.6% in Q3, compared to a 15.7% decline in Q2.
Furthermore, purchase applications were overall down by 18.2% year-on-year in Q3, compared to a decline of 15.5% in the previous quarter.
The network said rising borrowing costs have strained some borrowers as higher monthly repayments have reduced spending power.
Contrastingly, remortgage applications were up 0.78% year-on-year, which took the total average for mortgage application activity to minus 7.71%.
Stonebridge said the rising numbers of applications for remortgage helped slow the decline in overall mortgage activity year-on-year.
Why new-build property investment is appealing to a new generation of landlords
Sponsored by BM Solutions
Rob Clifford, chief executive of Stonebridge described these findings as a “mixed picture” for the housing market.
“The volume of remortgages continues to feed off a wave of ultra-low deals taken out during the pandemic era, which are now expiring,” he said.
Average mortgage rate declines in Q3
The average mortgage rate edged down to 4.92% in Q3 from 4.97% in Q2, although it remained 0.55 percentage points higher than a year earlier.
First-time buyers faced an average rate of 5.11%, also up 0.55 percentage points on an annual basis.
Despite this, first-time buyers increased their borrowing by 4.2% year-on-year, with the average loan to value (LTV) rising by 1.8 percentage points to 81.4%.
Borrower product preferences also shifted over the period. Although fixed rate mortgages remained the predominant choice, increased expectations of future interest rate reductions appear to have encouraged greater use of variable-rate products and shorter fixed terms.
The proportion of variable rate mortgages increased from 4.9% in Q3 2025 to 12.5% in Q3 2026.
As a result, the share of fixed rate lending fell from 95.1% to 87.5%, although the overall product mix was largely unchanged compared with the previous quarter.
Two-year fixed rate mortgages accounted for 67.5% of borrowing in Q3, an increase of 6.2 percentage points from 61.4% a year earlier. However, this was slightly below the 70% recorded in Q2 2026.
Clifford added: “It’s so hard to predict where inflation and borrowing costs will go next but, one thing’s for sure: borrowers will be better protected if they take the opportunity to lock in rates as early as possible.
“Whether they’re buying property or remortgaging, mortgage advisers are alive to the importance of this approach and we know many who are diligently supporting their customers in this way. It costs nothing and, should rates rise further, it could knock hundreds of pounds a month off repayments.
“Everyone needs to be proactive to put themselves in the best possible position, and it’s no surprise that two-year mortgage deals continue to dominate. Borrowers don’t want to be tied into expensive mortgage products should the market ease and mortgage rates fall.”
