Commentary on Mortgage lending statistics Q3 2023

The value of gross mortgage advances increased by 18.6% (£9.8 billion) from the previous quarter to £62.2 billion, the first increase since 2022 Q3, but remained 27.6% lower than a year earlier (Table A and Chart 1).

The value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 16.5% from the previous quarter to £51.5 billion, and was 41.4% lower than a year earlier (Table A and Chart 1).

The share of gross mortgage advances with interest rates less than 2% above Bank Rate decreased by 0.1 percentage points (pp) from the previous quarter to 96.1%, decreasing for the first time since 2021 Q2 (before the increases in Bank Rate), but remained 3.1pp higher than a year ago (Chart 2).

The share of advances with interest rates between 2% and 3% above Bank Rate increased over the quarter to 1.9% from 1.7%, while the share of advances with interest rates 3% or more above Bank Rate decreased by 0.1pp from the previous quarter to 2.0%.

The share of gross mortgage advances with loan-to-value (LTV) ratios exceeding 90% increased by 0.4pp from the previous quarter to 4.8%, but remained 0.2pp lower than a year ago (Chart 3).

Within this, the share of mortgages advanced with LTVs over 95% has stayed consistent from the previous quarter at 0.2%. This was the same as a year earlier.

The share of mortgages advanced in 2023 Q3 with LTV ratios exceeding 75% increased by 2.2pp on the quarter to 38.7%. This is 0.3pp higher than a year earlier.

The proportion of lending to borrowers with a high loan-to-income (LTI) ratio increased by 3.9pp from the previous quarter to 49.3%, but remained 2.1pp lower than a year earlier (Chart 4). Borrowers with high LTI are defined here as:

• Borrowers with single income who had a LTI ratio of 4 or above. This decreased by 0.1pp from the previous quarter to 8.0% of gross mortgage lending, the lowest observed since 2009 Q1.
• Borrowers with a joint income who had a LTI ratio of 3 or above. This increased by 3.9pp from the previous quarter to 41.3% of gross mortgage lending, the highest observed since reporting began in 2007.

The share of gross mortgage advances for buy-to-let purposes decreased by 0.7pp from the previous quarter to 7.5%, the lowest since 2010 Q3, and 5.0pp lower than a year earlier (Chart 5). The share of advances to owner occupiers was 92.5%.

Of the 92.5% of advances for owner occupiers, the share of gross advances for remortgages decreased by 2.7pp from the previous quarter to 29.4%, but remained 4.4pp higher than a year earlier. The share for house purchase increased by 3.5pp from the previous quarter to 57.4%, and was 1.3pp higher than a year earlier. Further advances and other mortgages (including lifetime mortgages) accounted for 5.7% of gross advances in total.

Of the 57.4% of advances for house purchases by owner occupiers, lending to first-time buyers increased by 1.2pp from the previous quarter to 25.8% of gross advances, the highest since reporting began in 2007, and 2.5pp higher than a year earlier. The share advanced to home movers increased by 2.3pp from the previous quarter to 31.7%, and was 1.2pp lower than a year earlier.

New arrears cases decreased by 0.3pp from the previous quarter, to 15.8% of the total outstanding mortgage balances with arrears (defined as the borrower failing to make contractual payments equivalent to at least 1.5% of the outstanding mortgage balance or where the property is in possession), but remained 5.1pp 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. This was 44.0% higher than a year earlier (Chart 6).

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%. This is the highest since 2017 Q2.