"This morning’s mortgage statistics from the Bank of England illustrate quite how much higher interest rates have sent the market into chaos."
- Karen Noye, mortgage expert at Quilter
The value of new mortgage commitments decreased by 16.5% between Q2 and Q3 to £51.5 billion, and was 41.4% lower than a year earlier, according to the latest Mortgage Lenders and Administrators Statistics for the third quarter of 2023.
MLAR takes its data from mortgage lending activities provided by around 340 regulated mortgage lenders and administrators and is published by the Bank of England.
The value of gross mortgage advances increased by 18.6% from the previous quarter to £62.2 billion, the first increase since Q3 2022, but remained 27.6% lower than a year earlier.
The proportion of lending to borrowers with a high loan-to-income (LTI) ratio increased by 3.9% from the previous quarter to 49.3%, but remained 2.1% lower than a year earlier.
The share of gross residential mortgage advances increased by 3.5% from the previous quarter to 57.4%, and was 1.3% higher than a year earlier.
The share of gross advances for residential remortgages fell by 2.7% from the previous quarter to 29.4%, but remained 4.4% higher than in Q3 2022.
The share of buy-to-let mortgage advances (covering house purchase, remortgage and further advance) decreased by 0.7% from the previous quarter to 7.5%, the lowest since Q3 2010, and 5.0% lower than a year earlier.
New arrears cases decreased by 0.3% from the previous quarter, to 15.8% of the total outstanding balances with arrears, but remained 5.1% higher than a year earlier.
The value of outstanding mortgage balances with arrears increased by 11.4% from the previous quarter, to £18.8 billion, and was 44% higher than a year earlier. The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.02% to 1.14%, the highest since Q2 2017.
Karen Noye, mortgage expert at Quilter, commented: "This morning’s mortgage statistics from the Bank of England illustrate quite how much higher interest rates have sent the market into chaos. However, despite these scary figures house prices have yet to tumble and in fact have recently been rebounding. These green shoots may soon be killed off by a winter frost if rates increase again or if there is another economic shock but for now house prices are remaining resilient.
"One positive sign from the data is that the value of gross mortgage advances increased by 18.6% from the previous quarter to £62.2 billion, representing the first increase since 2022 Q3, but remained 27.6% lower than a year earlier. However, this comes from a low base.
"What is more worrying is that the value of new mortgage commitments is 41.4% lower than a year earlier showing quite what an impact higher mortgage rates have had on people’s borrowing appetite with many potential buyers opting to sit on their hands during this unpredictable period.
"Elsewhere, unsurprisingly the share of gross mortgage advances for buy-to-let purposes decreased further to the lowest level since 2010 Q3. This demonstrates quite how inhospitable the tax environment has become for landlords. Many are now choosing to not bother adding to their property portfolios or leave the market altogether as a result. Landlords have faced successive changes to the tax landscape over the last few years making it harder and harder to turn a profit. Despite this rents have skyrocketed as the number of properties available to rent dwindles.
"Most worryingly the data shows that the value of outstanding mortgage balances with arrears increased by 11.4% from the previous quarter, to £18.8 billion, and was 44.0% higher than a year earlier. The nation are struggling desperately with sky high mortgage, food and energy costs and sadly some are falling behind."
