According to Stonebridge’s Mortgage Market Briefing for November, average mortgage rates have gone down by 39 basis points to 4.35% year-on-year, while average loan sizes went up by 3.5% during the period to £207,929 annually.
Rob Clifford, chief executive of Stonebridge, said the rise in mortgage applications in spite of economic headwinds shows that the “mortgage market continues to display notable resilience”.
He continued: “Much of this growth has been fuelled by falling mortgage rates, which are 39 basis points lower than they were a year ago, on average, making borrowing more affordable and attractive to prospective buyers but also those wondering whether to refinance or not.
“Markets have already priced in another 2-3 cuts over the coming 12 months, which should theoretically limit the scope for mortgage rates to fall much further. However, lenders are competing hard at present, which is likely to apply additional downward pressure on rates and provide extra momentum for the market.
“Now that the uncertainty surrounding the Autumn Budget is behind us, buyers are expected to feel more confident, helping to unblock activity that may have been held back in recent months.”
Fixed rates are dominant product choice
Looking at the fixed and variable mortgage split, around 95.3% of deals were taken out on a fixed rate term.
This is in line with last year and shows a “strong preference for repayment certainty, particularly in a market that has experienced recent volatility in rates,” Clifford said.
He continued: “The current pattern also suggests borrowers are taking a cautious, hedging approach. While rates are widely expected to fall in the months ahead, nothing is guaranteed. Therefore, the popularity of fixed rate deals likely reflects that sense of uncertainty among borrowers.”
Only 4.7% of deals in November were on a variable basis, which is also in line with the same period last year.
Clifford said that while variable rates still accounted for a “small minority of choices”, these products could “offer upside if rates fall further”. However, fixed rates would still have “overwhelming dominance” as borrowers “prefer the security and predictability of known payments”.
Nearly half of deals on two- or three-year terms
Regarding product length preference, the most popular choice was 2-3-year terms at 42.2%, which is up from 33.7% in the same period last year.
This was followed by 24.9% opting for a five-year deal or longer, a slight drop from 26.9% last year.
Around 20.8% chose a 1-2-year deal, a drop from 22.1% in 2024, and the proportion of those selecting 4-5-year deals declined from 15.1% to 9.4%.
Only 2.7% chose a 3-4-year deal, in line with last year.
Clifford said: “While mortgage rates have been falling over the past year, borrowers are increasingly reluctant to lock in for the longer term, instead preferring shorter-term fixed rates. It’s clear that borrowers crave short-term stability at a time of continued uncertainty, but also want to give themselves space to manoeuvre should rates fall in a year or two’s time.
“With markets now anticipating additional rate cuts over the coming months, things can change quickly, as we’ve seen in the past. So it seems borrowers are adopting a cautious approach.
“In other words, they are hedging their bets, opting for short-term certainty with medium-term flexibility, rather than committing immediately to a longer-term fix in what remains an uncertain environment.”
Repayment mortgages are most popular choice
Stonebridge added that 81.5% of products were on a repayment basis, with 19.5% being on an interest-only, which is in line with the prior period.
Clifford said borrowers taking out interest-only deals tend to have “higher incomes, significant bonuses, or clear repayment strategies in place, such as the sale of a second property”.
He said: “However, we could see interest-only becoming a more viable option for a wider selection of borrowers if the Financial Conduct Authority changes its rules to allow the sale of property as a suitable repayment vehicle.
“Such a change could make these loans a more popular and accessible option for a greater number of borrowers. For now, however, the data suggests that the majority of borrowers remain focused on traditional repayment structures, prioritising certainty and gradual debt reduction.”
Remortgages make up nearly two-thirds of deals
The majority of deals in November were for remortgages, accounting for 62.5% of deals, a rise from 57.3% in 2024.
Purchase deals made up 37.5% in the same period, a drop from 42.7% in November last year.
Clifford said this year has been particularly strong for refinancing, driven by the fact that “a large volume of fixed rate loans are coming up for renewal”.
“As a result, remortgages and product transfers continue to make up the majority of activity, accounting for nearly two-thirds of cases in November. While this may give the impression that purchase lending is weak, that is not the case.
“In fact, purchase activity has been stronger in almost every month this year compared with the same month in 2024. It is simply the sheer number of maturing loans that has skewed overall activity towards refinancing,” he noted.
Clifford added that looking ahead, next year would also be strong for remortgages as borrowers “continue to take advantage of more attractive rates and competitive deals”.
“If the Bank of England delivers the anticipated 2-3 rate cuts over the coming months, we could see even more borrowers refinancing, further supporting overall market activity,” he said.
Average LTV ticks up in November
The average loan to value (LTV) rose to 59% in November from 57.7% in the prior month, in line with last year.
Clifford said the change was likely to reflect “subtle shifts in the mix of mortgage activity rather than any dramatic change in borrowing behaviour”.
He explained: “Much of the rise can be attributed to the composition of the market. First-time buyers, who typically have smaller deposits and therefore higher LTVs, continue to be active. At the same time, the bulk of cases this year has been refinancing, where LTVs tend to be lower, which helps explain why overall movements remain modest.
“Looking ahead, with mortgage rates having eased, we expect purchase activity to strengthen next year. This could support greater first-time buyer engagement and potentially lead to a further, gradual increase in average LTVs, reflecting both increased borrowing and cautious optimism among buyers entering the market.”
