I know that both the words are pronounced and used differently. I also found another question on this site: "Use of loose and lose [closed]", but that is about the usage of the word. My question is completely different to that one.
The ending 'se' is pronounced 's' in loose and 'z' in lose: respectively, /luːs/ and /luːz/. What caused this change?
'Lose' came from Old English (OE) word losian while 'loose' was taken from Old Norse around the thirteenth century. There was a process in OE through which s, f and th became voiced respectively to [z], [v] and [ð] when they occurred between voiced sounds i.e. between two vowels or a vowel and anther voiced sound. There was no phonemic contrast of voice among the OE fricatives.
The ⟨s⟩1 in the OE form of 'lose' was intervocalic (between vowels), so it became [z] which survived into Modern English (ModE).
'Loose' came into English in the thirteenth century by the time the voicing was no longer productive, so it retained the original [s] sound.
There are lots of pairs that exhibit the same sound change such as wolf/wolves, bath/bathe, house (n)/house (v), breath/breathe, life/lives, loaf/loaves, close (adj)/close (v), knife/knives, cloth/clothes etc. All these are the remnants of OE property called intervocalic fricative voicing
Old English had a phonetic property called fricative voicing, whereby non-velar fricatives—s, þ ~ ð2, f—became voiced when they were flanked by vowels, or a vowel and another voiced consonant. The fricatives s, þ ~ ð, f were voiceless elsewhere. /ʃ/ was always voiced.
There were no distinctive voiced fricatives in Old English. The realisations [f - v], [θ - ð] and [s - z]3 were allophonic. It was the only way to get [z], [v] and [ð] because Old English didn't have phonemic [z], [v] and [ð]. In a nutshell:
Note that the fricatives were phonemically voiceless; the voicing was allophonic.
Lose came from Old English losian. The s was intervocalic, so it became [z] due to that property:
In Middle English, it became losen ([ˈloːzən]), then it lost the terminal nasal and became [ˈloːzə], then the terminal schwa was lost and the vowel [oː] was changed to [uː] by the Great Vowel Shift.
Loose entered English in the 13th century and by that time, the voicing wasn't productive anymore. So it retained its original /s/.
"Loose" has probably always been pronounced with [s] - the Norse word that it was borrowed from is spelt with double "s".
"Lose" has been pronounced with [z] at least since Old English. (Between vowels, OE "s" was pronounced [z]. I use square brackets here because the s/z distinction in OE wasn't phonemically significant - they were allophones.)
The words "loose" and "lose" are etymologically only very distantly related: they derive from different Germanic roots (but probably have a common origin in Proto-Indo-European).
You should not expect to see a close or consistent sound/spelling relationship in English.
They are different words spelled differently with different meanings. Hence they are pronounced differently.
