This also shows a 5.3% increase from Q3 last year as people anticipate interest rate rises.
The overall value of the residential loans in Q3 2014 was £1,255.6 billion, an increase of 0.5% from Q2 and 1.8% year-on-year.
Lending to first-time-buyers decreased by 0.4% in Q3, however the overall value of loans increased over the quarter to £12.1 billion, the highest quarterly amount since Q3 2007.
The data also showed a decrease in LTVs of over 90%, down by 0.3% in Q3. However the figure is still up by 2.1% year-on-year as more first-time-buyers enter the market.
The number of new arrears cases in Q3 2014 was 24,146. This was 2.5% lower than in Q2 2014 and was the lowest since the series began in 2007. The amount of new arrears also experienced a 3.7% decline over the past quarter and stood at £44 million. This is a drop of 20% compared with Q3 2013.
Simon Crone, Vice President – Mortgage Insurance Europe for Genworth, said:
“Today’s figures confirm that high loan-to-value mortgages can play a vital role in the post-MMR market. Despite falling slightly from Q2 to Q3, lending activity at 95% LTV was significantly stronger than it was a year ago. Given that rigorous affordability checks are in place across the market, it proves that it is perfectly possible to lend prudently to borrowers with deposits as low as 5%.
“Great strides have been made this year to put the mortgage market on a surer footing. Now this secure platform is in place, efforts must focus on ensuring that first time buyers are not marginalised again. Despite recent progress, high LTV activity is still over-reliant on the Help to Buy mortgage guarantee, which accounted for nearly half of the products available at 95% LTV in Q3.
“It is no wonder that first time buyer numbers remain historically subdued when the products they have traditionally relied on are still in short supply. Whatever comes of next year’s election, it is vital that the lending community puts its weight behind the high LTV market in 2015 to ensure a higher volume of prudent first time buyer lending.”
Jonathan Harris, director of mortgage broker Anderson Harris, said:
"The third quarter was stronger from a lending perspective than the second as heightened activity in the housing market in the first half of the year filtered through into the lending figures.
"The vast majority of borrowers are opting for a fixed rate which is a no-brainer; while an interest-rate rise may still be some way off, fixed rates are just too good to turn down and continue to fall as lenders compete for business. The average interest rate on total mortgages outstanding also decreased, suggesting that borrowers aren't overburdening themselves and will be able to cope with a rate rise when it comes, particularly if they have opted for a fixed rate.
"Buy-to-let continues to grow as lenders offer cheaper rates and more relaxed criteria to attract investors. With more people having to rent for longer until they can save up a deposit, the prospects for the sector continue to be strong and we expect it to perform well next year.
"The proportion of first-time buyers decreased slightly although the value of loans taken out by them over the quarter rose to the highest quarterly amount since Q3 2007. With lenders offering higher loan-to-values and rates falling across the LTV bands, it is slightly easier for first-time buyers although the Bank of Mum and Dad is still being called upon significantly to help.
"Income multiples decreased slightly, which is likely to be a knock-on effect of the Mortgage Market Review and stricter affordability criteria. It is good to see that borrowers are not over stretching themselves; however, some easing of the rules with regard to older borrowers in particular is essential."
Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented:
“Lending volumes for Q3 show there is plenty of life left in the market following the Mortgage Market Review, with lenders firing on all cylinders to record the largest total advances in any third quarter since Q3 2008. This is a positive sign for consumers, who are benefiting from improved access to mortgage finance despite tougher affordability checks.
“Lenders are currently tripping over themselves to win business, with many of the major providers locked into a mortgage rate war. This is providing consumers with historically low pricing: it’s therefore unsurprising that so many are choosing to lock into preferential deals, with MLAR statistics showing the proportion of advances at fixed rates is at its highest since tracking began in 2007. This preference for fixed rate deals is likely to increase as consumers seek to protect themselves from an expected interest rate hike in 2015.
“The signs certainly look positive as we approach the end of what has been a restorative year for the UK mortgage market. While there are still a number of economic uncertainties on the horizon, and we may be yet to see the full impact of regulatory changes, consumers are now in a better position to access affordable mortgage finance than they were a year ago.”
