Mortgage advances slumped by 24.2% from the previous quarter to £58.8bn, Bank of England data shows, as buyers held off due to stamp duty changes.
This was the lowest figure since the first quarter of last year, and was 2.4% lower than a year ago, according to the central bank’s second quarter mortgage lenders and administrators statistics.
The Bank’s data comes after stamp duty’s lower thresholds, on 1 April, were reset back to September 2022 levels, before former Prime Minister Liz Truss’ mini-Budget.
However, the Bank says the value of new mortgage commitments — lending agreed to be advanced in the coming months — increased by 14.6% from the previous quarter to £78.2bn, the highest since the third quarter of 2022, and was 16.8% higher than a year earlier.
The proportion of lending to borrowers with a high loan-to-income ratio decreased by 3.7% from the previous quarter to 41.5%, the largest decrease since the first quarter of 2023, but was 1% lower than a year ago.
The share of gross mortgage advances for house purchase for owner-occupiers fell by 10.3% from the previous quarter to 56%, the lowest share since the first quarter of last year, and was 1.4% lower than a year earlier.
The share of gross advances for remortgages for owner occupation increased by 7.7% from the previous quarter to 29%, the highest share since the first quarter of last year, and was 0.4% higher than a year ago.
SPF Private Clients chief executive Mark Harris says: “The fall in value of gross mortgage advances reflects the end of the stamp duty concession whereby buyers brought forward purchases to the first quarter in order to take advantage of the savings to be made.
“However, the increase in value of new mortgage commitments to the highest level since the third quarter of 2022, an indicator of future lending activity, indicates a growing resilience in the market, with borrowers confident to take on debt.
Harris adds: “There may no longer be a stamp duty concession available, but several base-rate reductions – with the prospect of more to come – are easing affordability and enabling borrowers to plan ahead and commit to purchases.
“Although lenders have been easing criteria, the decrease in lending to borrowers with a high loan-to-income ratio suggests that borrowers are not overextending themselves and rushing to take out bigger loans.
“However, with lending to first-time buyers decreasing compared with the previous quarter, it remains tricky for those trying to get on the ladder for the first time, particularly if they don’t have help from the Bank of Mum and Dad.”
