Stonebridge reported weak mortgage demand in the second quarter as higher borrowing costs and affordability pressures weighed on the market.
The network said conditions could improve later this year if… Economic inflation And reduce financing costs.
Stonebridge’s latest Mortgage Market Index shows that mortgage applications fell by 18.5% year-on-year between April and June. Remortgage applications fell by 20.8%, while purchase applications fell by 15.5%. First-time orders fell by 15.7%.
Stonebridge said the slowdown came after mortgage rates rose. Renewed conflict involving Iran has sent oil prices and inflation expectations soaring. This raised swap rates, which lenders use to price mortgages.
The average mortgage rate was 4.97% in the second quarter. That was up from 4.31% in the first quarter of 2026 and 4.74% in the first quarter of 2025. Rising interest rates have put pressure on affordability and prompted some borrowers to delay moving or remortgaging.
Remortgage activity was weaker after a particularly strong first quarter. Applications rose 45.8% year-on-year, as borrowers exited low-interest deals in the pandemic. Stonebridge expects remortgaging to remain a key feature of the market throughout 2026.
Lending for home purchases also slowed. The average loan amount across all mortgages fell by 1.8% to £209,932. However, first-time buyers borrowed an average of £216,984, up 1.5% on the previous year.
The numbers reflect broader market trends. Mortgage approvals in May were 10.8% lower than a year earlier, Bank of England data showed.
Borrowers also preferred shorter-term products as price uncertainty persisted. The share of choosing two-year fixed-rate deals rose to 70%, compared to 59.4% the previous year. Five-year repairs fell to 23.2%, from 32.3%. Variable rate mortgages are also becoming more popular. Their share increased from 5.2% to 12.1%.
Rob Clifford, CEO of Stonebridge, said the second quarter was a “tough or twisty moment” for many borrowers. However, he said he remains optimistic about the second half of the year.
“The second quarter has really been a difficult moment for those thinking about moving, buying or remortgaging, and there is no doubt that we have seen a slight slowdown in activity as expected,” says Clifford. “However, the key thing to watch is the expected path of inflation as we move into the second half of the year. I am confident in the outlook.”
Clifford said lower oil prices reduced mortgage financing costs before renewed geopolitical tensions destabilized markets.
“Mortgage rates and the Bank of England’s base interest rate are not the same thing,” he added. “Swap rates, which the market uses to price mortgages, have risen this year while the base rate has gone nowhere. So borrowing costs could fall without the Bank of England doing anything, and that is exactly what was happening until last week.”
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