The mortgage market remained buoyant in the second quarter but figures released by the Bank of England (BoE) show that an affordability squeeze is likely.
Overall, the outstanding value of all residential mortgage loans at the end of Q2 stood at £1,648.0bn, 3.8% higher than a year earlier.
The Bank’s latest Mortgage Lenders and Administrators Statistics show that the value of gross mortgage advances in the quarter stood at £77.9bn, which was £1.0bn greater than the previous quarter, but 12.6% lower than in Q2 2021.
While the value of new mortgage commitments (lending agreed to be advanced in the coming months) in Q2 was 1.7% greater than the previous quarter but 2.6% less than a year earlier.
BoE figures also show that the share of gross advances with interest rates less than 2% above Bank Rate was 89.9% in 2022 Q2, 33.7% higher than a year ago, and the highest seen since 2008 Q3.
The increase was mostly driven by the 0.50% increase in Bank Rate across the quarter, rather than any significant change in mortgage interest rates.
The share of mortgages advanced in 2022 Q2 with loan-to-value (LTV) ratios exceeding 90% was 4.5%, 2.4%higher than a year earlier and the highest seen since 2020 Q2.
Overall the share for house purchase for owner occupation was 52.4%, up 1.7% on the previous quarter, but down 14.0% from 2021 Q2.
The share of gross advances for remortgages for owner occupation was 27.0%, an increase of 10.5% since 2021 Q2, but a decrease of 2.0% since 2022 Q1.
Meanwhile, the value of outstanding balances with arrears decreased by 0.7% over the quarter and 7.2% over the year, to £13.2bn in 2022 Q2, and now accounts for 0.80% of outstanding mortgage balances, the lowest since recording began in 2007.
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Myron Jobson, senior personal finance analyst, interactive investor:
“The Bank of England’s latest mortgage lenders and administrators statistics show that the property market remained buoyant in the second quarter of this year.
“By the end of Q2, the outstanding value of all residential mortgage loans was £1,648bn – 3.8% higher than a year earlier.
“The value of new mortgage commitments made by lenders in Q2 was 1.7% greater than the previous quarter at £83.9bn – but 2.6% less than a year earlier when the stamp duty holiday was still in effect.
This suggests that buyers were looking to beat the rate rises by locking into mortgage deals while rates were still relatively low.
“It’s likely to be a similar story when it comes to mortgage advances, which reached £77.9bn in Q2 – £1bn greater than the previous quarter.
“Things have changed in the housing market since Q2. It is still running red hot, but it is exhibiting the hallmarks of a slowdown. The various housing market indices suggests that new buyer enquiries have waned in recent months and the number of mortgage approvals for house purchases has fallen.
“The cost-of-living crisis in tandem with soaring property prices, which have gone up faster than wages, and cheap mortgages rapidly going the way of the dodo have intensified the affordability squeeze. These factors, as well as the prospect of higher interest rates to rein in runaway inflation, are likely to go some way towards taming frothy housing market.”
