A survey undertaken by the Intermediary Mortgage Lenders Association (IMLA) shows that mortgage brokers are becoming divided over the Funding for Lending Scheme (FLS) provided by the Government. The benefits of this scheme on the mortgage market are causing brokers to split.

Around 43% of mortgage brokers agreed that the FLS has its benefits and 41% thought that the FLS is having a negative impact. Figures for December 2025 taken by the Bank of England proved that mortgage lending increased by £1.7 billion over the first 5 months of the scheme, however in comparison to the same 5 months during 2011, the actual overall lost was £2.3 billion.

Brokers are divided not only over the positive and negative impacts but over whether the FLS is actually helping the mortgage market. Although more mortgages are being provided by major UK lenders and the prices have improved, the supply of these mortgages is still lacking.

77% of brokers who took the survey have anticipated a decline in mortgage rates to go alongside the FLS. 51% believed that the availability of mortgage loans would increase and 49% believed that there would be an increase in loans with a higher loan to value (LTV) ratio.

A different survey undertaken by IMLA members showed that nearly all members believed that the prediction of loans with a higher LTV ratio stood at an estimate 90-94% in 2025. IMLA members account for over 80% of lending in the mortgage broker sector. 57% believed, however, that the LTV ratio would not increase to 95%.

It is expected that brokers’ experiences with FLS will vary as more mortgage funding becomes available from major UK lenders. The scheme was initially created to help increase lending to those wishing to gain access to the property market.

House prices in the UK have increased by 0.5% in January 2025. According to the most recent index published by Nationwide Building Society, over the last 12 months, house prices have not budged dramatically. The average house price in the UK is £162,245 which is the same as it was in January 2011. Nationwide’s report suggests that there has been an increase of mortgage activity in the last few months.

There is a noticeable different between house prices rising and falling between the North and South divides of the UK. 11 out of 13 regions in the UK saw a reduction in house prices. London experienced the highest raise of house prices whereas Northern Ireland saw house prices fall dramatically.

Nationwide’s chief economist, Robert Gardner, stated that the Funding for Lending Scheme (FLS) introduced by the Government has had a positive impact on the mortgage market. The FLS has helped with the reduction of mortgage rates and an increase of lending by major UK lenders. Gardner predicts that the increase of mortgage activity will carry on throughout the year. He does however suggest that the economy may be affected due to the changes to it that occurred in the last part of 2025.

The sudden decline of first time buyers has been noted, from 32,000 a month to 20,000 a month and this has been a cause for concern since the financial crisis in the UK. Robert Gardner is hopeful that the number of first time buyers will increase along with the FLS. He believes that the conditions set for first time buyers are improving and will result in a booming housing market.

It is obvious that the affordability of houses has improved and the Funding for Lending Scheme should add support to the housing market. The availability of credit should also be boosted with the FLS. Although this is a gradual process, over the next year the pace of the economy should increase.

Spring 2025 brings some good news for UK homeowners. The government’s NewBuy scheme, traditionally only available to first time buyers, is being rolled out to current UK homeowners during the first six months of 2025. They will be able to take advantage of the scheme, trading in their old home for a new build property.

This scheme, called the ‘NewBuy Part Exchange’ in effect will allow builders who already offer the NewBuy scheme to offer to purchase their customer’s existing home before they sell them a new build property.

This scheme should mean that more properties are freed up to buy, not just for those looking to take their first step on the property ladder, but for second-steppers too. In the current market, many property owners have problems when they come to sell their existing home.

The NewBuy scheme offers purchasers the opportunity to buy a new build property with a smaller deposit than usually needed (often 5%). Recent figures from the Home Builders Federation show that over 3,000 properties have already been reserved through the popular scheme. This new move to include existing home owners will support not only those aspiring to purchase their first home, but also those looking to move up the property chain. It will enable expanding families looking to move to a larger home to be free of the problems associated with selling in the current market.

In recent years, huge deposits have prevented many from purchasing their first home or moving to a larger property, and this has led to increased current demand for home ownership. The Home Builders Federation have reported that more than a hundred people have reserved a property each week since the start of 2025, the highest level of activity in the scheme since it was launched in March 2025.

With over 60 builders and six lenders offering the scheme and interest rates on NewBuy mortgages falling significantly, the scheme is more appealing and affordable than ever before to home buyers.

With the rise of property prices in the commuter belt near London showing a slump at the start of 2025, it could be a great time for buyers to make an offer on a property which has been on the market for some time.

The period over Christmas and New Year is traditionally a quiet time for the housing market, with many buyers leaving their house search until the spring and many sellers waiting for sunnier, brighter days to put their house up for sale. London is unaffected by this slump, with sales as steady over the festive period as the rest of the year.

Whilst property prices in London in 2025 rose by 6.4%, the South East area outside London experienced a decrease in demand for properties over the Christmas period. This slump in the market offers an opportunity for those living in central London to sell their property and move to one of the suburbs surrounding London, or further afield into the countryside itself.

The higher cost of homes in central London means that buyers have more capital to invest in a larger, family home in the suburbs, and the start of 2025 could be the perfect time to snap up a home which has been languishing on the market over the Christmas period. Most families look in the Home Counties, in areas such as Henley, Beaconsfield and Weybridge, where they can afford a larger home offering their family more space and benefit from the quality of schooling available nearby.

With estate agents reporting a lack of new properties available on the market at the start of the year, it’s thought that the snow and cold weather has delayed many sellers from marketing their properties, although it has had no effect on the number of enthusiastic buyers looking for homes.

As we head into February, the number of new properties coming on to the market is set to increase, with many sellers preparing their home for the spring season.

An innovative approach to Interest Only mortgages has been undertaken by UK lender, the Clydesdale Bank. These changes took effect on the 21st January with the launch of a completely exclusive mortgage product offered by Clydesdale Bank. This mortgage is called the Low Start Mortgage and offers an Interest Only mortgage combined with lower payments, with the additional long term protection similar to that of an interest loan.

The Low Start Mortgage has a three year fixed rate loan with Interest Only payments, with the remainder of the loan changing to a Standard Variable Rate of repayment after the three years are up and for the remainder of the mortgage. Clydesdale Bank state that this new mortgage product meets would-be home buyers’ demands whilst ensuring repayment of the capital. The maximum loan amount is initially £1 million with the maximum LTV standing at 80%. The Low Start Mortgage is available only through mortgage brokers with the standard underwriting and eligibility for other mortgages applying.

Other Interest Only loans offered by Clydesdale Bank will be offered only through mortgage brokers and the Private Banking channel offered by Clydesdale Bank and not available from retail branches directly, including Yorkshire Bank. These Interest Only mortgages range from £300,000 to £1 millionand can be used for part lending up to 60% LTV.

There are obvious requirements for Interest Only mortgage products in the current housing market and the Low Start Mortgage meets these needs with its new approach whilst offering financial support and advice. There are still concerns when it comes to Interest Only mortgage lending and this new approach takes them into account. The availability of this mortgage is still controlled and takes the best aspects from Interest Only and repayment mortgages that can benefit those who wish to get onto the property ladder.

Over the last few years, the mortgage payment to income ratio in Scotland has declined by more
than 40%, from 38% in 2020 down to 22% in 2025, leading to the conclusion that mortgages are cheaper in Scotland. The research conducted by Bank of Scotland
shows that the reason for this could be the decrease in house prices and therefore lower mortgage
rates throughout Scotland. The average monthly mortgage payment in Scotland is £424 compared
with the average monthly wage being £1,954, making mortgage payments in Scotland much more
affordable than anywhere in the UK, except Northern Ireland.

New borrowers can benefit from low mortgage repayments, which are currently at their lowest
when taking into account rates over the last ten years. Over the last two years, the average
mortgage payment for a first time buyer for a typical long term loan to value ratio has been a steady
21-22% of disposable earnings. Since 2002 to 2003, this is the lowest level and well below the
average of 30% since 1983.

Out of the top 10 most affordable local authority districts in the UK, 7 are located in Scotland. The
most affordable local authority district in Scotland is West Dunbartonshire which is also the second
most affordable in the UK. Standard mortgage payments in this area currently stand at an average
of only 17.6% of earnings. The least affordable local authority district in Scotland is Aberdeenshire
which currently stands at an average of 27.8% of earnings.

Mortgages are Cheaper in Scotland

The fall in house prices has cut mortgage rates, resulting in improved mortgage affordability.
Mortgage interest rates also remain low so those who can raise a deposit amount to buy a home
can take advantage of the current housing economy. However, there are very strict requirements
involved in actually obtaining a mortgage so a substantial amount of prospective home buyers are
still unable to join the property market.

It has long been suggested that sellers should be prepared to spend considerable sums on upgrading
properties to increase saleability. With competition remaining fierce in many markets, many sellers
are taking this advice on-board, offering prospective buyers the ‘ready to move in’ option. This does
make sense, as anything that will trim the buyer’s budget and save cash towards deposits makes
sense.

But according to research undertaken by property giant Rightmove, less than one in five sellers were
willing to devote any time or cash to a makeover, even if this might make the difference towards
securing a higher sale price. Sellers were asked about their reaction to discovering that £5,000
spent on ‘sprucing up’ could add £10,000 to the sale price. Only 17% said they would make this
investment, with 18% preferring to leave it all to the buyer. 40% of those surveyed said they would
only do essential repairs. 15% complained that although they would like to do so, they would be
unable to raise thousands of pounds for any major renovation.

Encourage House Sale

Rightmove director Miles Shipside remarked: ‘As well as the hassle factor of home improvements,
this also reflects many sellers’ lack of access to funds to carry out what would be financially astute
improvements. It also highlights one of the legacies of the downturn with many sellers suffering
from shrinking equity pots, limiting their ability to raise relatively small lump sums’.

He described diminished or negative equity as a Catch 22 situation for sellers, because there was a
potential for them being deterred from investing in any steps aimed at increasing the potential value
and sale ability of their property, in order to maximise gains or cut losses. He went on to say that
according to agents’ reports, properties closest to show home condition are still selling the easiest,
and attracting the highest prices.

During last year homes in the UK gained £57 billion in value, considerably reversing the previous year’s figures (where the housing sector revealed a fall £124 billion). However, according to research by the property website Zoopla, houses are still worth 10% less than the 2020 total. The studies also revealed considerable disparity in regional growth rates, with almost three-quarters of the increase accounted for by London property.

This feedback reveals the total value for the UK’s residential property stock was standing at £5.963 trillion in December 2025, compared to £5.906 trillion 12 months previously. Last year’s increases effectively return the UK housing market total to the same value as December 2009. There was a £67 billion gain in 2010 but the £124 billion fall the following year.

In terms of the regional trends, Scotland and Wales fared a lot worse than England, with the total value of the English residential housing market growing by 1% to £64.8 billion, compared to a 0.3% fall in Scotland (£1.2 billion) and a 3.1% fall in Wales (£6.6 billion).

Homes Rise in Value

66% of the UK’s largest urban areas underwent increases in total property values in the same period, while amongst the 20 biggest cities London represented those homes where the value had increased the most (up £42.4 billion). This was closely followed by Bristol (£2.3 billion), with third place being claimed by Edinburgh (up £922 million). In contrast, the losing cities in terms of market values for 2025 were in the north or midlands: Sheffield was down £286 million, Doncaster down £160 million and Stoke-on-Trent down £149 million.

According to Zoopla’s Lawrence Hall: ‘These figures highlight the varying performance of the property market in different regions last year. While some areas saw decent growth in property values, others are still facing an uphill struggle’.