Mortgage lending between April and June this year fell to its lowest level since early 2024, according to the Bank of England, a likely consequence of the end of the stamp duty concession in March.
The Bank’s latest Mortgage Lenders and Administrators Statistics report shows that new advances fell by 24.2% compared to the previous three months, suggesting that buyers may have rushed to secure mortgages and complete their property purchases before the stamp duty changes came into effect.
Despite the dip in lending, the total value of outstanding residential mortgage loans still grew slightly, rising by 0.3% to £1,703.6 billion, up 2.6% compared to the same period last year.
The number of new mortgage commitments - agreements to lend in the future - rose by 14.6% between April and June. This might indicate that some confidence is beginning to return, helped by recent cuts to the Bank of England base rate, and hopes of further reductions later this year.
Increase in higher loan-to-value lending
There has been a small but noticeable increase in the proportion of mortgages being taken out with high loan-to-value (LTV) ratios, where buyers put down a smaller deposit. Around 7.1% of new mortgages between April and June were for buyers borrowing more than 90% of the property’s value, the highest proportion seen since 2008.
The share of mortgages advanced to those with only a 5% deposit increased slightly to 0.5%, the highest share since the same quarter in 2012.
At the same time, lenders seem to be pulling back on lending large sums relative to borrowers’ incomes. The proportion of lending to borrowers with high loan-to-income (LTI) ratios reduced in the second quarter of the year, despite several lenders recently confirming plans to let some homebuyers borrow more. This might indicate that borrowers may be reluctant to borrow more than they can comfortably afford to repay.
Positively, the number of mortgage holders falling behind on their monthly payments fell in the second three months of the year, with both new arrears cases and the total value of overdue mortgage debt reducing. The proportion of mortgages in arrears is now lower than it was a year ago.
Remortgaging on the rise
Nearly a third (29%) of all owner-occupier mortgage activity between April and June this year involved people switching their mortgage to a new deal, the highest proportion since early 2024.
If your current mortgage deal is coming to an end, this could be a good time to look at your options. While borrowing as a whole is down, the rise in mortgage commitments suggests growing stability in the mortgage market, so it’s worth acting early if you're due to remortgage in the next few months.
