UK Mortgage and Housing Market Update – October 2025
This update draws on the latest data from sources including the Bank of England,
Nationwide, Halifax, and industry reports to give you a clear picture of market
movements. Feel free to relay relevant insights to your clients to help them navigate
the current landscape.
Key Highlights
- The Bank of England maintained its base rate at 4.00%, with market expectations
building for a potential cut in December amid easing inflation. - House prices showed positive monthly gains across major indices, with annual
growth remaining modest but steady. - Mortgage approvals rose to 65,944 in September (latest available data), marking
the highest level in 2025 and reflecting growing borrower confidence. - Affordability enhancements and lender flexibility have supported first-time
buyers and remortgage activity despite budget uncertainties.
Interest Rate Developments
The Bank of England held its base rate at 4.00% in its November 6, 2025, decision,
following a close 5-4 vote, with four members advocating for a 0.25% cut. This follows
no change in October, as policymakers balanced persistent services inflation
against economic growth needs. Mortgage rates have eased further, with the
average two-year fixed rate (at 75% loan-to-value) around 4.69% by early
November. Lenders have increased offerings for first-time buyers, contributing to a
more supportive environment.
House Price Trends
October data indicated continued stabilization in house prices. Nationwide’s House
Price Index reported a 0.3% month-on-month increase, with annual growth rising to
2.4% (up from 2.2% in September), pushing the average UK home price to £272,226.
Halifax reported a +0.6% month-on-month increase, with annual growth at 0.6%,
bringing the average property value to a record £299,862. This variation highlights
methodological differences, but the market overall shows resilience amid budget
concerns, aided by rate stability and affordability adjustments.
Forecasts for 2025 have been refined, with expected UK house price growth now in
the range of 2-4%, influenced by gradual rate reductions and economic outlook.
Mortgage Approvals and Lending Activity
Bank of England data for September 2025 revealed net mortgage approvals for
house purchases rising to 65,944 – an increase of about 1,000 from August –-
signalling sustained demand and the highest level in 2025. This level aligns with prepandemic
norms, suggesting ongoing underlying demand.
Buy-to-let (BTL) arrears fell in Q3 2025, with possessions rising but remaining below
historical norms, indicating sector resilience. Recent affordability rule relaxations
have boosted borrowing capacity by up to 20% in some cases, especially for firsttime
buyers, driving renewed interest. However, new mortgage commitments saw a
minor dip, reflecting measured borrower confidence.
Market Sentiment and Outlook
October’s market showed a notable cooling, with buyer enquiries declining due to
budget uncertainties, creating a cautious environment. Experts foresee steady growth
in lending activity through 2025, as further inflation cooling may prompt additional
rate cuts. While high costs and budget impacts pose challenges, the outlook is
positive, with prospects for heightened activity post-budget.
