"The macroeconomic environment remains uncertain and volatile so there can be no let up from lenders in the support they offer to their customers."
- Tom Cuppello, director of risk at Broadstone
The share of gross mortgage lending at above 90% LTV is at its highest level since 2008, according to the latest Mortgage Lenders and Administrators Return (MLAR) data from the FCA.
MLAR is a quarterly statistical release aggregated from data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.
Its latest data for Q3 shows that the share of gross mortgage advances with LTV ratios exceeding 90% increased by 0.6pp from the previous quarter to 6.6%, the highest share since Q2 2008, and was 1.6pp higher than a year earlier.
The value of gross mortgage advances rose by 8.9% between Q2 and Q3 to £65.5 billion, the highest since Q4 2022 and 6.7% higher than a year earlier.
Within this, the share of advances for house purchase increased by 6.9% on a quarterly basis and 6.1% annually.
Remortgage lending fell 5.8% between Q2 and Q3 and is down 7% compared to last year, while buy-to-let lending fell by 1.1% on the quarter but remains 0.5pp higher than a year earlier.
The value of new mortgage commitments (lending agreed to be advanced in the coming months) fell by 1.3% from the previous quarter to £66.0 billion, but remains 34.2% higher than a year earlier.
The data also shows that new arrears cases (as a proportion of total outstanding balances with arrears) decreased by 1.3pp from the previous quarter to 9.7%, and was 6.3pp lower than a year earlier.
The value of outstanding mortgage balances with arrears fell by 0.4% from the previous quarter to £21.9 billion, but remained 17.5% higher than a year earlier. The proportion of the total mortgage loan balances with arrears, relative to all outstanding mortgage balances, has stayed the same as the previous quarter at 1.3%, but remained 0.2pp higher than a year earlier.
Tom Cuppello, director of risk at Broadstone, commented: “The impacts of the significant increases to mortgage rates over the past couple of years is reflected in a notable rise to the value of mortgage balances with arrears. This is now slowing and new arrears cases are also falling as households adjust to the new rate environment but there remains further pain to come.
“The Bank of England forecasts that around 4.4 million mortgages are expected to see payments rise by 2027, including some 420,000 households that are bracing for £500-per-month hikes. While household financial resilience has stabilised since the worst of the cost-of-living crisis, it is clear that there are still strong headwinds with the base rate expected to remain unchanged at 4.75% at next week’s Bank of England meeting.
“The macroeconomic environment remains uncertain and volatile so there can be no let up from lenders in the support they offer to their customers. As we head into a difficult period of the year for personal finances, it is evident that lenders need to remain proactive in supporting the long-term financial interests of their customers.”
Holly Tomlinson, financial planner at Quilter, added: "The latest data from the FCA show that the mortgage market is generally looking somewhat brighter, the mortgage charter has played a significant role in helping over a million people navigate significant challenges and higher interest rates over the last year.
"According to the data, the value of gross mortgage advances increased by 8.9% from the previous quarter to £65.5 billion, marking the highest new advances since the ill-fated mini budget, after which interest rates soared and market demand significantly dampened. This surge underscores renewed momentum in lending activity, likely bolstered by stabilising interest rates and improved buyer confidence. However, the value of new mortgage commitments, which reflect future lending agreements, fell slightly by 1.3% from the previous quarter, though they remain 34.2% higher than a year earlier, showing significant improvement over the year.
"Interestingly, the share of mortgage advances with loan-to-value (LTV) ratios above 90% rose to 6.6%, the highest since 2008, reflecting increased risk-taking as lenders seek to attract buyers with smaller deposits. Some might worry about the correlation with the financial crisis however lending criteria is much stricter than it was then with stress testing rules dictating customers can afford their mortgages even in a volatile interest rate environment. Conversely, remortgaging activity dropped to 22.8%, down from the previous quarter, as many homeowners have already locked in deals during the earlier rate-hiking cycle.
"On arrears, the picture is mixed. New arrears cases as a proportion of outstanding balances decreased from the previous quarter but remain higher than a year ago. The total value of mortgage balances in arrears also dipped slightly but is still up 17.5% compared to the same time last year, suggesting that while immediate pressures may have eased for some, financial challenges persist for others.
"The data on the Mortgage Charter is interesting, with around 1.7 million mortgages benefiting from the flexibility options introduced. Measures such as temporary payment reductions and interest-only terms have helped 214,000 borrowers manage their repayments.
"However, it remains unclear whether many of the people who benefited from the Charter might have done so regardless, as some of the measures are typically adopted throughout the industry as standard practice. For example, 1,738,489 people with mortgages approaching the end of a fixed-rate deal locked into a new deal up to six months ahead of maturity. This is typically standard practice and makes up the majority of those who have benefited.
"Similarly, 410,345 people with mortgages locked into a new deal up to six months ahead of maturity, before the start of the new deal, locked into an alternative deal.
"What is clear from this data is that while things are improving in the property market, we are not quite out of the woods yet and those remortgaging in the new year might be in for a nasty shock."
