The Bank of England has released its Mortgage Lenders and Administrators Statistics for the second quarter of 2023, shedding light on the state of the UK’s residential mortgage market. The report paints a complex picture, with notable changes in outstanding mortgage values, gross mortgage advances, interest rates, and more. Let’s dive into the key takeaways from this latest report.
Outstanding Mortgage Values Rise Slightly – Mortgage Lenders and Administrators Statistics
The outstanding value of all residential mortgage loans in the UK reached £1,655.5 billion by the end of 2023 Q2. This represents a modest increase of 0.4% compared to the same period the previous year. However, it is important to note that this marks the largest decrease on the previous quarter since reporting began in 2007, indicating a recent slowdown in mortgage activity.
Gross Mortgage Advances See a Significant Decline
The value of gross mortgage advances in 2023 Q2 stood at £52.4 billion, marking a considerable drop of £6.3 billion compared to the previous quarter. Furthermore, this figure is a staggering 32.8% lower than the same quarter in 2022. This decrease represents the lowest observed since 2020 Q2, reflecting a cooling off of the mortgage market.
New Mortgage Commitments Show Signs of Recovery
Despite the overall decrease in mortgage activity, there is a glimmer of hope in the form of new mortgage commitments. In 2023 Q2, the value of new mortgage commitments was £61.7 billion. While this was 26.6% less than a year earlier, it also marked a 26.2% increase compared to the previous quarter. This is the first increase and the highest value observed since 2022 Q3, suggesting a potential rebound in the coming months.
Loan to Value (LTV) Ratios and Loan to Income (LTI) Ratios
The report also highlighted changes in loan to value (LTV) and loan to income (LTI) ratios. In 2023 Q2, 4.4% of gross mortgage advances had LTV ratios exceeding 90%, a slight decrease compared to a year earlier but a 0.4 percentage point increase compared to the previous quarter. The proportion of lending to borrowers with a high LTI ratio increased by 1.6 percentage points on the quarter to 45.3% in 2023 Q2. However, this figure was 5.2 percentage points lower than a year earlier, indicating a shift in borrower profiles.
Purpose of Mortgages
The report also provided insights into the purpose of mortgages. The share of gross advances for house purchase for owner occupation increased to 54.0%, up 3.9 percentage points on the previous quarter and 1.6 percentage points from 2022 Q2. Conversely, the share of gross advances for remortgages for owner occupation decreased by 2.7 percentage points since 2023 Q1, settling at 32.0%. The share for buy-to-let purposes stood at 8.1%, the lowest observed since 2010 Q4.
Arrears on the Rise
A concerning trend highlighted in the report is the increase in outstanding balances with arrears. These balances grew by 13.0% over the quarter and 28.8% over the year, reaching £16.9 billion in 2023 Q2. This represents 1.02% of outstanding mortgage balances. New arrears cases made up 16.0% of the total outstanding balances with arrears in 2023 Q2, showing little change compared to the previous quarter.
Speak To a Qualified Mortgage Professional
In conclusion, the Bank of England’s Mortgage Lenders and Administrators Statistics for 2023 Q2 present a mixed picture of the UK’s residential mortgage market. While outstanding mortgage values have increased slightly, gross mortgage advances have seen a significant decline. The report suggests that there are signs of recovery in new mortgage commitments. However, the increase in arrears is a concerning development that warrants further attention. As the year progresses, stakeholders in the housing market will be closely monitoring these trends for potential implications on the broader economy. If you are a property investor or a homeowner concerned about mortgages and property, we are here to offer help and guidance. Give our team a call today or drop us a message to see how we can help you.