The data shows the total value of outstanding loans reduced slightly from Q4 2010 to £1,212bn in Q1 2011. Alongside this new advances in the first quarter totalled £33bn, 10% lower than in Q4 2010 but 3% up on the amount advanced in Q1 2010.
New commitments totalled £35bn, 1% up on last quarter and 3% up on Q1 last year. Lending for house purchase represented a reduced share of new lending this quarter, accounting for some 54% of new advances and 52% of new commitments.
The proportion of new lending done at an LTV of more than 90% fell below 2% for the first time since Q1 last year and new lending with a combination of high LTV and high income multiple also fell, to just below 1% of new lending.
The proportion of loans to borrowers with an impaired credit history remained at 0.3%; it has been at this level since Q3 2009.
The number of new arrears cases in Q1 was 35,600, 8% lower than last quarter with the total number of accounts in arrears at the end of the quarter standing at 337,000, 2% down on last quarter and 7% down on Q1 2010.
Consequently, the proportion of the residential loan book that is in arrears, and hence not fully performing, also fell, to 2.88%.
The number of new possessions in the quarter rose for the first time in a year, up 17% to 9,613.
Arrears totalling £34m on 12,916 accounts were capitalised in Q1.
Paul Hunt, managing director of Phoebus Software, said: “Although total lending fell in Q1, this was primarily a result of seasonal factors and the comparison with Q1 2010 is more revealing.
“While still relatively cautious, there are indications lenders are feeling increasingly confident as borrower finances improve - the total number of accounts in arrears fell significantly compared to Q1 2010.
“Borrowers are benefiting from very low repayment rates, which have allowed them to haul themselves out of difficulty.
“Given that it now looks unlikely that rates will rise before 2012, lenders have responded with cautious optimism about borrowers finances, which will provide a much needed boost to the stagnant property market.”
David Brown, commercial director of LSL Property Services, added: “Record low interest rates played the crucial role in putting a ceiling on arrears and repossessions over the past two years by keeping monthly mortgage payments exceptionally low. But the FSA's latest lending data shows that the soaring cost of living is starting to take its toll on mortgage holders’ household budgets and their ability to meet their monthly mortgage commitments.
“In the first quarter of 2011, possessions were up 17% compared to the previous quarter alone. As inflation continues to soar and we begin to see the impact of public spending cuts ripple through the labour market, borrowers’ budgets will come under increasing strain and the number of homes facing repossession is unlikely to fall away. Thousands have been granted a temporary reprieve by record low interest rates, but it is crucial that when the Bank rate is hiked, borrowers have their finances in order and are not taken unawares by higher monthly costs.”
