The outstanding value of all residential mortgage loans was £1,667.1bn at the end of 2022 Q3, 4.1% higher than a year earlier, according to the Bank of England’s (BoE) latest mortgage report.
BoE’s Mortgage Lenders and Administrators Return (MLAR) is a quarterly statistical release aggregated from data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.
The release found that not only was the value of outstanding loans higher, but the value of gross mortgage advances in 2022 Q3 was £85.9bn, £8.0bn greater than the previous quarter, and 17.0% higher than in 2021 Q3.
Rhys Schofield, managing director at Peak Money, said: “The third quarter largely came before the calamity of the ‘mini budget’.
“Bizarrely, December seems to have got busier as we go. This really doesn’t feel like a crisis.
“The dust around rates seems to have settled. People still need mortgages whether they stay put or move home and based on estate agent listing activity, the market seems OK.”
Additionally, BoE data found that the value of new mortgage commitments in Q3 this year was 4.5% greater than the previous quarter and the highest value recorded since 2007 Q3.
The share of gross mortgage advances with interest rates less than 2% above Bank Rate was 93.0% in 2022 Q3, 35.7 percentage points (pp) higher than a year ago, and the highest observed since 2008 Q2.
Sofia Jones, managing director at Penny House, added: “The third and fourth quarter will prove to be worlds apart. In the third quarter, there was activity and demand.
“But following the now infamous ‘mini budget’, demand from buyers understandably dropped off a cliff as mortgage rates shot up and the Government fell into chaos.
“Where we have been busy is with requests to remortgage as people sought to protect themselves as best they can.”
Reaction
Andrew Montlake, managing director of Coreco:
“The third and fourth quarters may as well be in different dimensions, as the mayhem caused by the mini-Budget saw lenders up their rates sharply, which torpedoed demand.
“The mortgage market in the third quarter was fluid but now, like the weather, it’s frozen.
“Higher interest rates and sky-high inflation, coupled with an economy edging into recession, will see the fourth quarter figures differ significantly.
“Many prospective buyers are also waiting to see if house prices come down significantly in the months ahead.
“Though we’re already seeing a price correction, a collapse is off the cards due to the continued lack of supply and a jobs market that is still strong, for now at least.
“We’re already seeing a rise in enquiries for secured loans and remortgages to consolidate debt as people seek to batten down the hatches as the full force of the economic storm hits in 2023.
“Where there is still demand is among first-time buyers, many of whom are desperate to exit the rental market as rents hit Olympian heights.
“If they fix for five years, they’re betting that they’ll ride out any potential negative equity dip.”
Elliott Culley, director at Switch Mortgage Finance:
“The data for the third quarter of 2022 shows a mortgage market in good health, but we all know what happened next: the catastrophic ‘mini budget’.
“2023 will be a hard 12 months for brokers and consumers alike.
“That said, fixed-rate mortgage rates are coming down and this, along with falling house prices, will hopefully entice consumers back into the market for purchases.
“It will also be a relief for clients needing to remortgage, although rates will still be much higher than they paid previously.
“The main enemy now is inflation and the effect this is having on people’s ability to borrow the amount they require.
“Bigger loans, due to affordability reasons, are becoming far harder to obtain.
“People can’t borrow what they could have earlier in the year.
“This trend will continue, and the energy price guarantee is to rise further in April.
“How lenders approach the affordability problem will shape the next 12 months for the market.”
Craig Fish, managing director at Lodestone:
“Anyone would think that a tsunami had hit on September 23rd. Overnight, the mortgage market changed forever.
“We have been inundated with enquiries, but for all the wrong reasons. People are worried and stressed about what the future holds because of the carnage caused by Truss and Kwarteng.
“They would have caused less damage if they had triggered the big red button.
“That said, I am expecting 2023 to be a positive year.
“It’s been a long time since we have had to give good old-fashioned, fully personalised advice to clients, rather than just offering the cheapest fixed rate.
“This is going to be a good year for those brokers who have been around for some time. I never thought I’d be thanking Liz Truss for anything.”
Elliott Benson, mortgage broker at Sett Mortgages:
“The ‘mini-Budget’, or at at least what happened after it, hit sentiment like a sledgehammer so the fourth quarter will see an altogether different set of figures from the Bank of England.
“Higher rates and tighter affordability mean people can’t borrow as much, which in turn means they won’t be able to offer as much for property.
“House prices will invariably head south during the next 12 months as people adjust to the new rate environment.
“I would advise anyone who is still thinking of buying or remortgaging to keep calm, seek professional advice and take the right decision for their own circumstances.
“Never has independent mortgage advice been more important.”
Jon Halbert, mortgage and protection adviser at Key Financial Associates:
“As demand for property drops off due to the Bank of England’s rate hikes, and another likely this week, sales will inevitably slump.
“But this alone will not reduce property prices. When people become desperate to sell and reduce the sale price of their home below that of the current market value, all the homes in the same street reduce in value to the same level.
“This is the domino effect that triggers house price falls.
“The rising cost of borrowing will force a growing number of homeowners to sell because their affordability on the new rates when they come to remortgage, coupled with the cost of living, will become impossible.
“Repossessions will also rise as a result of recent rate rises. If lenders relax their criteria around interest-only mortgages, many will be able to survive potential repossession.”
