The value of gross mortgage advances increased by 36.9% in Q3 from the previous quarter to £80.4bn, the largest increase in new advances since the third quarter of 2020, the Bank of England reveals.
The BoE shows advances were also 22.7% higher compared to the same period in 2024.
It also reports that the outstanding value of all residential mortgage loans increased by 0.9% from the previous quarter to £1,733.7bn, and was 2.9% higher than a year earlier, the Bank of England reveals.
The value of new mortgage commitments increased by 1.6% from the previous quarter to £79.4bn, the highest since Q3 2022, and was 20.3% higher than a year earlier.
The share of gross mortgage advances with loan-to-value (LTV) ratios exceeding 90% increased by 0.3 percentage points from the previous quarter to 7.4%, the highest share since Q2 2008, and was 0.8 percentage points higher than the same period last year.
The proportion of lending to borrowers with a high loan-to-income (LTI) ratio increased by 3.3 percentage points from the previous quarter to 44.7%.
This is the largest increase since Q3 2020, but remained 0.6 percentage points lower than a year earlier.
Meanwhile, the share of gross mortgage advances for house purchase for owner occupation increased by 2.5 percentage points from the previous quarter to 58.6%, but remained 5.8 percentage points lower than a year earlier.
The share of gross advances for remortgages for owner occupation decreased by 0.4 percentage points from the previous quarter to 28.6%, but remained 5.8 percentage points higher than 12 months ago.
The value of outstanding mortgage balances with arrears decreased by 2.9% from the previous quarter to £20.6bn, and was 5.8% lower 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 1.2%, and was 0.1 percentage points lower than a year earlier.
The proportion of total outstanding balances with arrears that are new arrears cases decreased by 0.1 percentage points from the previous quarter to 8.8%, the lowest since 2022 Q1, and was 0.9 percentage points lower than 12 months ago.
Quilter financial planner Ian Futcher says: “Mortgage lending has picked up meaningfully in the latest figures, but it’s important to remember this comes after a very slow year in the housing market. High interest rates and affordability pressures kept many would-be buyers on the sidelines.”
“Gross mortgage advances jumped by almost 37% compared to the previous quarter and are now nearly a quarter higher than a year ago, while new mortgage commitments reached their highest level since late 2022.”
“That suggests growing confidence as mortgage rates inch down and people begin to move forward with plans they may have paused.”
“Even so, the data shows how tough it remains for those trying to buy. Lending at over 90% loan-to-value has risen to its highest share since before the financial crisis, and a rising proportion of borrowers are stretching their incomes further to secure a home. This reflects the reality of high house prices and the lingering impact of elevated borrowing costs.”
“There is some reassuring news, with mortgage arrears still very low and falling versus last year, indicating that households who already have mortgages are largely managing repayments despite the squeeze.”
“Overall, the market is improving from a weak base, but affordability challenges remain front and centre, particularly for first-time buyers. Continued reductions in mortgage rates will be key to ensuring this recovery is sustainable rather than reliant on people taking on greater financial strain.”
Also commenting on the figures, MPowered Mortgages director of mortgages Peter Stimson says the bank’s data “captures a 4K, ultra HD snapshot of how the mortgage market was, not how it is”.
“Even though this data shows the mortgages that completed in the third quarter of the year, most of these loans were applied for in summer – before pre-Budget paralysis hit the pause button on much of the market.”
“For several months leading up to the Budget, demand for home purchase mortgages fell sharply as buyers were spooked by rumours of big tax rises on buying, selling or even just owning property.”
“While remortgaging has held fairly steady, the Budget’s chilling effect has dragged down lending – and this will be reflected in the Bank’s next data release.”
“On the face of it, this Q3 data looks great – the strongest in five years – but it’s also likely to be a high water mark.”
“Looking ahead, the market should start 2026 strongly. With the Bank of England all but certain to cut its base rate below 4% in time for Christmas, and another cut to 3.5% potentially coming in February, demand should bounce back.”
“Most lenders have priced these base rate cuts in already, and following the Budget we’ve seen some slash the rates they offer to customers.”
“While further big cuts are unlikely and we’re already close to the bottom of the interest rate cycle, competition between lenders is likely to become intense as they fight for a share of the recovering market.”
