The Bank of England’s Credit Conditions Survey found that changing risk appetite had the biggest influence on the availability of secured credit to households in Q3, generating a lender response score of 18.8%.
Mortgage availability improved for all borrowers, with scores of 28.1% and 27% for lending at 75% loan to value (LTV) or less and high LTVs, respectively. Lenders said they expected this to stay steady and positive in Q4, indicated by readings of 26% and 25.5% respectively.
Lenders said they were willing to lend to borrowers with less than 10% equity in Q3 and would continue to be open to this demand in Q4.
Mark Harris, chief executive of SPF Private Clients, said: “Lenders remain keen to lend and have the funds available to do so. The past few months have seen them ease affordability criteria, increasing the borrowing potential of many mortgage applicants.
“Demand from borrowers remained unchanged during the third quarter, which is a nod to the resilience of the market and the desire of many buyers and sellers to get on with their moves. It is more impressive given that the data covers the summer months, when one would normally expect less interest in buying and selling as attention turns to holidays. Likewise, remortgaging demand increased and is expected to do so in the fourth quarter of the year as borrowers shop around for competitive mortgage rates to minimise the shock of coming off comparatively cheaper deals.”
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Richard Pinch, senior director for risk at Broadstone, said: “While the summer months appeared to have lifted the supply of household credit, demand for household borrowing remained unchanged, perhaps in reflection of consumers holding fast amid growing uncertainty around the Chancellor’s looming Autumn Budget in November.
“While the market is continuing to show welcomed signs of resilience, the final months of the year could rock household confidence if any tax hikes or other major policy changes are announced in the Budget. Lenders should ensure they continue to offer flexible options that suit the long-term financial interests of all their customers and stand ready to protect borrowers and themselves against any headwinds.”
Remortgage demand to increase
This was despite a relatively flat reading for house purchase mortgage demand, which received a lender score of 0.7% in Q3, indicating no change. Lenders expect this to stay flat, as suggested by a reading of 4.5% in Q4.
By contrast, lenders gave a score of 25.9% for remortgage demand in Q3, suggesting positive activity over the period. This was expected to continue in Q4, with a lender score of 15.1%.
A decline in the demand for buy-to-let (BTL) lending was reported during Q3, with a score of negative 12.5%. However, lenders said this was set to improve, according to a score of 2.4% for Q4.
Peter Stimson, director of mortgages at MPowered Mortgages, said the BTL mortgage market “ground to a halt” last year and there had since been a “steady exodus of small-time landlords”.
He added: “But rather than dying, as many feared, the market was kept alive by steady demand from professional buy-to-letters. But after three successive quarters of rising demand for BTL mortgages, things slammed into reverse during the third quarter of 2025.
“The number of BTL loans agreed between June and August dropped by 12.5% compared to the previous quarter, and the sector’s anxiety about the potential for further tax increases in next month’s Budget is a key factor in the slowdown.
“Successive Chancellors have painted a target on the backs of BTL owners, removing valuable tax breaks and introducing a punitive stamp duty surcharge that kicks in whenever they buy a property.
“With rumours now swirling that they might have to pay National Insurance on the rental income they earn, many purchases have been put on hold or cancelled.”
Rates to stabilise in Q4
When asked about lending spreads in Q3, lenders returned a score of 33.3% for how this changed during the quarter, pointing to a narrowing in the cost of mortgages relative to swap rates. This is expected to steady in Q4, based on a predicted score of 3.4%.
Lenders said default rates fell slightly in Q3 and would keep falling in Q4.
Harris said spreads had narrowed following “a number of rate reductions from the Bank of England and lower swap rates, which underpin the pricing of fixed rate mortgages”, adding: “Although borrowers have had to get used to rock-bottom rates being a thing of the past, mortgage rates are fairly steady, enabling borrowers to plan ahead with more confidence.”
Stimson said: “Mortgage interest rates have been mostly static for the past few months, and even though swap rates have dipped this week, following the news that wage inflation has cooled, no one expects the Bank of England to cut its base rate again until next year.
“With little prospect of interest rates going any lower in the coming weeks, the looming prospect of another tax raid has choked off the market’s recovery and led many would-be landlords to play an uncomfortable waiting game.”
