The latest Mortgage Lenders & Administration Return (MLAR) data from the Financial Conduct Authority (FCA) revealed that the outstanding value of all residential mortgage loans has reached a record high.
The total mortgage stock rose by 0.5% from the previous quarter to £1,678.2bn, marking the highest level since reporting began in 2007.
Compared to the same period last year, this represents a 1.3% increase.
The value of gross mortgage advances saw a significant rise, increasing by 4.9% from the previous quarter to £68.8bn.
This marked the highest level of new advances since the fourth quarter of 2022 and represented a substantial 29.9% increase year-on-year.
Similarly, new mortgage commitments – loans agreed to be advanced in the coming months – grew by 4.9% from the previous quarter to £69.3bn, reaching the highest level since the third quarter of 2022.
Compared to a year earlier, this figure was up by 50.7%.
There has been a notable shift in borrower trends, particularly in loan-to-income (LTI) ratios.
The proportion of lending to borrowers with a high LTI ratio rose by 0.5% from the previous quarter to 45.8%, the highest level since the end of 2022.
Year-on-year, this figure increased by 3.1%.
Changes in the distribution of mortgage lending were also observed.
The share of gross mortgage advances for house purchases intended for owner-occupation fell slightly by 0.8% from the previous quarter to 63.7%.
However, this figure was still 3.9% higher than the same period last year.
Meanwhile, remortgages for owner-occupation increased by 0.7% from the previous quarter to 23.5%, though they remained 4.8% lower than a year earlier.
First-time buyers continued to play a prominent role in the mortgage market, with their share of total lending increasing by 0.3% from the previous quarter to 29.6%.
This marked the highest proportion since MLAR reporting began in 2007 and was 1.9% points higher than a year earlier.
However, financial difficulties remained a concern. The proportion of new arrears cases, as a percentage of total outstanding balances with arrears, increased by 2.3% from the previous quarter to 12.0%.
Despite this quarterly rise, the figure remained 1.5% lower than the previous year.
The total value of outstanding mortgage balances with arrears rose by 1.3% from the previous quarter to £22.1bn, marking an 8.4% increase from the same period in 2023.
Nevertheless, the proportion of total mortgage balances with arrears, relative to all outstanding balances, remained steady at 1.3% compared to the previous quarter, though it was slightly higher than a year earlier by 0.1%.
Richard Pike, chief of sales and marketing at Phoebus Software, said: “The latest FCA data shows a continued recovery in mortgage lending, with gross advances and new commitments reaching their highest levels since 2022.
“Encouragingly, arrears and possessions have both declined from the previous quarter, suggesting that improving affordability, lender forbearance measures, and stabilising interest rates are helping to ease financial pressures on borrowers.
“While this is a positive development, the broader economic environment remains uncertain. Inflationary pressures have eased, and mortgage rates have continued their downward trend, but household budgets are still under strain from high living costs.
“The industry will be watching closely to see if this reduction in arrears is the start of a sustained trend or a temporary dip as borrowers adjust to new financial realities.”
He added: “Proactive arrears management will remain critical, particularly with a significant volume of fixed-rate deals due to mature in 2025.
“Lenders have increasingly turned to data-driven approaches to identify at-risk borrowers early and offer tailored support.
“The focus now will be on ensuring that these interventions continue to be effective in maintaining stability for both borrowers and the wider market.”
