Scottish Housing Market Review: Q1 2025

5. Mortgage Approvals and LTVs

5.1. New Mortgage Advances

Mortgage funding is required for the majority of house purchases: over the period from January 2024 to November 2024 two-thirds of house sales in Scotland involved a mortgage. (Source: UK HPI)

There were 8,330 new mortgages advanced to first-time buyers in Scotland in Q4 2024, an annual increase of 22.3%. Meanwhile, there were 8,110 new mortgages advanced to home movers in Scotland in Q4 2024, an annual increase of 21.8%. Over 2024 as a whole, the number of mortgages advanced to first-time buyers rose by 16.1% relative to 2023, while for homes movers the increase was 13.7%.

Using information collected by the Financial Conduct Authority, ONS have recently published time series data on the number of first-time buyer mortgage sales broken down by local authorities across the UK, available from this ONS webpage.

Source: UK Finance

5.2. Mortgage Approvals

Chart 5.2 plots the monthly number of mortgage approvals across the UK for house purchase by individuals. Mortgage approvals for house purchase, which are the firm offers of lenders to advance credit fully secured on dwellings by a first-charge mortgage, are a leading indicator of mortgage sales as they reflect activity early in the buying process.

The mortgage approvals data shows that for the most recent three-month period for which data is available (November 2024 to January 2025) approvals across the UK were 26% higher than the corresponding period 12 months prior. This suggests that the recent improvement in activity levels is continuing, although it should be noted that the figures could have been temporarily boosted by buyers in England attempting to purchase ahead of the temporary Stamp Duty Land Tax cut in England ending on 31 March 2025. (Source: Bank of England).

Source: Bank of England

5.3. Loan-to-Value (LTV) Ratios

Chart 5.3 shows that after initially falling following the Covid pandemic, mean LTV ratios on new mortgages advanced to both first-time buyers and home movers in Scotland recovered to their pre-pandemic levels, before declining again as the upward trend in interest rates beginning at the end of 2021 fed through to mortgage lending.

However, the mean LTV ratio for first-time buyers has now recovered to 82.7% in Q4 2024, up slightly from 82.4% in Q2 2024 and not far off its recent peak of 83.4% in Q2 2022. In contrast, the mean ratio for home movers, which was unchanged from the previous quarter at 69.3%, remains 3.4 percentage points below its recent peak of 72.7% in Q2 2022. [Source: UK Finance]

Source: UK Finance

The share of all regulated residential lending across the UK with an LTV greater than 90% fell slightly from 7.2% in Q3 2024 to 6.9% in Q4 2024, although, other than Q3 2024, this is its highest level since Q2 2008, prior to the impact of the 2008 financial crisis. The share of all lending with both an LTV greater than 90% and a high income multiple also fell slightly from 5.2% in Q3 2024 to 5.1% in Q4 2024, but again, other than Q3 2024, as well as a similar level recorded in Q3 2019, this is its highest level since prior to the financial crisis. This recovery in higher-risk lending will have contributed to the increase in the mean LTV ratio for first-time buyers in Scotland discussed above. However, lending with both an LTV greater than 95% and a high-income multiple remains limited – its share in Q3 2024 was 0.2% compared with a pre-financial crisis peak of 4.5% in Q3 2007.

Source: FCA. Higher-risk lending is classified by the FCA as an LTV over 90% or an income multiple greater than or equal to 3.5 for single-income purchasers or 2.75 for joint-income purchasers.

The total number of residential mortgage products rose by 233 over the month to stand at 6,684 in early March 2025, the highest level since February 2008, prior to the financial crisis. The number of products with maximum LTV of 95% rose slightly over the month (by 7 products) to stand at 395 in early March, the highest level since prior to the pandemic. [Source: Moneyfacts UK Mortgage Trends Treasury Report]

Mortgage shelf life is the length of time between the launch of a product and its repricing or withdrawal from the market, and average shelf life can be an indicator of volatility in the mortgage market. The average mortgage product shelf life in March 2025 was 16 days. Although this was well below the 36 days in February 2025, Moneyfacts points out that it is common for shelf life to experience a drop in March of each year, which they attribute to an increase in product changes following a slowdown over the festive period. [Source: Moneyfacts UK Mortgage Trends Treasury Reports]

There has been a significant increase in the number of buy-to-let (BTL) products, which have risen from 3,231 in December 2024 to 3,746 in March 2025, the highest level since Moneyfacts records for this series began in 2011. [Source: Moneyfacts UK Mortgage Trends Treasury Reports]