The latest MLAR data from the Bank of England shows that the mortgage market remained resilient in Q2, with new mortgage commitments rising and the value of arrears decreasing.
The value of gross mortgage advances increased by 11.1% from Q1 to £77.4 billion, and was 31.7% higher than a year earlier.
In addition, the value of new mortgage commitments increased by 1.4% from the previous quarter to £79.2 billion, and remains 1.3% higher than in Q2 2025.
However, there are signs that higher mortgage rates are stretching borrowers. The share of advances with interest rates less than 2% above Bank Rate decreased by 0.2 percentage points (pp) from the previous quarter to 94.5%, the lowest since Q1 2023, and was 0.6pp lower than a year earlier.
Meanwhile, the share of gross mortgage advances with LTV ratios exceeding 90% increased by 0.4pp from the previous quarter to 8.4%, the highest share since Q2 2008, and was 1.4pp higher than a year earlier.
Despite higher rates and LTVs, the value of outstanding mortgage balances with arrears decreased by 1.9% from the previous quarter to £19.7 billion, the lowest since Q3 2023, and was 7.3% lower than a year earlier. The proportion of balances with arrears remained unchanged between Q1 and Q2 and is 0.1pp lower than the same quarter last year.
Broken down by lending type, the share of gross mortgages for buy-to-let purposes fell by 0.9pp from Q1 to 8% and 1.2pp year-on-year.
Residential purchase accounted for 56.1% of all lending, down 1.6pp on a quarterly basis but 0.1% higher than a year earlier.
Residential remortgage lending increased by 3.1pp quarterly to 31.2%, the highest since Q1 2024, and is 2.2pp higher than last year.
Nathan Emerson, CEO of Propertymark, commented: “When looking at the year to date, we have seen a myriad of complications within the economy that were largely unexpected at the very start of the year. From a consumer viewpoint, affordability has rightly been in sharp focus; however, it is extremely welcome news to see the value of gross mortgage advances increase during the second quarter of 2026.
“Overall, the housing market has remained largely resilient across most regions. As we head into autumn, we hope to see greater stability and growth return to the UK housing market, with the next Bank of England base rate decision and the Autumn Budget likely to influence market sentiment in the weeks ahead.”
Richard Pike, sales and marketing director at Phoebus Software, said: “The latest MLAR figures show just how difficult it has been for the mortgage market to find a clear direction this year. There are certainly signs of market resilience with new mortgage commitments rising, however, uncertainty around the economic outlook and the path for interest rates continues to weigh on borrowers and lenders alike.
“While gross mortgage advances rose 11.1% during the quarter, new commitments only rose 1.4%, showing the market isn’t generating a huge amount of new business. Much of the increase in advances is being driven by remortgage activity as borrowers reach the end of fixed-rate deals. This shows how remortgaging remains a vital part of activity.
“Encouragingly, arrears continue to point towards the underlying resilience of borrowers. While affordability remains a concern, most households continue to meet their repayment commitments, suggesting that the pressures facing the market have not been translated into widespread financial distress.
“Possessions paint a similar picture, albeit with a sharper decrease in numbers. This should also be reassuring that households are continuing to meet commitments amidst ongoing uncertainty and financial difficulties.
“Looking ahead, the key challenge for lenders will be managing a market where customer needs are becoming increasingly varied. Some borrowers will be looking for greater flexibility as they refinance, while others will need additional support as pressures around affordability persist. Lenders that can combine effective servicing with the ability to adapt products and processes to changing customer circumstances will be best placed to navigate the next phase of the market.”
