KBRA releases research examining the UK housing and mortgage market, which continues to exhibit resilience in the face of shifting macroeconomic dynamics.
While inflationary pressures have moderated, uncertainty around the pace and extent of future Bank of England (BoE) rate cuts persists. Despite these uncertainties, housing finance activity remains robust and, while borrower performance varies, it has generally stabilised across segments.
Following a trough in late 2023, house price growth has accelerated again, partly due to a moderation in mortgage rates. At the same time, rental price growth has eased in most regions, though rents generally remain elevated relative to pre-pandemic levels. In this report, we provide an in-depth analysis of housing finance trends across the UK, including structural headwinds such as the evolving housing affordability challenges and emerging risks within the residential property sector.
Key Takeaways
- KBRA expects prime delinquencies to continue to decline and stabilise at low levels. Nonconforming and buy-to-let (BTL) delinquencies are expected to remain broadly stable through early 2026, with gradual improvement thereafter for BTL mortgages and over the medium term for nonconforming loans.
- The BoE's recent rate cuts should push delinquencies lower, as well as improve affordability metrics.
- House prices have recently improved, with higher offer prices seen in Q1 2025. The UK Office for Budget Responsibility (OBR) forecasts house prices to continue to rise into late 2025 before levelling off. Supply constraints persist, with low levels of new housing continuing to support prices.
- First-time buyers continue to represent a growing share of total lending, accompanied by increases in fixed rate loans and higher loan-to-value (LTV) ratios.
- After 14 consecutive years of Conservative leadership, the recent Labour Party victory introduces a new dynamic in the UK mortgage market. Most notably, the party has pledged GBP5 billion in government housing investment, including a target to build 1.5 million homes over the next five years. This ambitious goal has been met with scepticism, as it would require building 300,000 homes annually, a pace not achieved since the 1970s.
Click here to view the report.
Recent Publications
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About KBRA
KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.
Doc ID: 1009754
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Kali Sirugudi, Managing Director
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