New commitments also down
The value of gross mortgage advances and new mortgage commitments hit their lowest level since the second quarter of 2020, the Bank of England’s (BoE) Mortgage Lenders and Administrators Statistics for Q1 2023 have shown.
Gross mortgage advances in Q1 2023 totalled £58.8 billion in value, which was £22.9 billion lower than the previous quarter and 23.6% lower than in 2022 Q1.
New mortgage commitments, or lending agreed to be advanced in the coming months, valued £48.9 billion in Q1 2023, a 16.1% decrease compared with the previous quarter and 40.7% less than a year earlier.
The outstanding value of all residential mortgage loans was £1.68 trillion at the end of the first quarter of the year, 2.7% higher than a year earlier, but lower than the previous quarter for the first time since Q2 2017.
The value of outstanding balances with arrears continued to go up in Q1 2023 after recording its first increase since the first quarter of 2021 in the previous quarter. Mortgage arrears rose by 9.5% over the quarter and 12.5% over the year, to £14.9 billion in Q1 2023.
Jeremy Leaf, north London estate agent and former RICS residential chairman, said the recent volatility in the mortgage and property markets made these figures particularly interesting.
“Although comparisons with the busy period 12 months ago can be misleading, they still show that buyers are proceeding cautiously, despite improvements in activity on the ground since the beginning of the year,” Leaf noted.
“Provided mortgage deals are left on the table and interest rates don’t keep rising, then stability will return as the market is still being supported by strong employment numbers and better-than-expected salaries.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added that the latest BoE figures showed a housing market settling into a ‘new normal’ following the pandemic and stamp duty holiday.
“Rates continued to edge upwards with the share of gross mortgage advances with interest rates less than 2% above base rate rising 7.7 percentage points to 93.9%,” said Harris, breaking down the statistics. “Borrowers will be all too aware of the rising cost of mortgages following the flurry of repricing upwards over the past couple of weeks, although things seem to be starting to settle on that front.
“Reassuringly, lenders and borrowers continue to demonstrate caution with only 4% of gross mortgage advances with an LTV of more than 90%, a 1.1 percentage point decrease from Q4 2022. High loan-to-income ratios also reduced by 5.6 percentage points to 43.7%, the lowest seen since Q2 2020 as borrowers avoided overstretching themselves, given the uncertainty with regard to future rate rises.
“The share of gross advances for remortgages picked up as borrowers were spurred on to secure a deal and perhaps move off their lender’s standard variable rate given rises in interest rates. However, buy-to-let lending dipped to 9.8% of the total, the lowest since Q4 2011, perhaps reflecting a decline in the attractiveness of the sector for novice landlords at least given tax and regulatory changes, as well as rising mortgage costs.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, Twitter, and LinkedIn.
