While mortgage market health is currently being driven by those looking to remortgage, there’s unlikely to be a resurgence in activity until rates start to fall.

This is according to Octane Capital chief executive Jonathan Samuels who points out that gross lending has sunk to its lowest since interest rates increased, driven by a reduction in house purchase lending.

The latest market analysis by Octane Capital has looked at gross mortgage lending by sector and how this figure has changed both quarterly and over the last year.

The analysis of gross mortgage lending figures from the Building Society Association shows that total mortgage lending sat at just £50.5bn during the first quarter of 2024, the lowest level seen since interest rates started to climb in December 2013.

As a result, total mortgage lending was down -5.4% versus Q4 2023 and sat -13.1% below the total seen in Q1 2023.

Gross lending for house purchases fell by -11.1% between Q4 2023 and Q1 2024, totalling £29.7bn, as homebuyers continue to struggle with the far highest cost of borrowing in today’s market, despite a hold on interest rates at 5.25%.

However, further dissection of the data by Octane Capital shows that there are signs of positivity starting to emerge and these are being largely driven by those looking to remortgage.

Gross lending with respect to remortgaging actually increased by 3.5% in Q1 2024, with ‘other’ gross lending also seeing growth of 9.7%.

This suggests that the stability that has come via a hold on interest rates has, at least, helped to boost mortgage market sentiment amongst those who already have a mortgage in place.

While these early signs of growth are positive, there remains some way to go with respect to a return to form for the mortgage sector, with gross lending still down on an annual basis for house purchases, remortgaging and other lending.

Samuels commented: “Stability is key within the mortgage sector and such a sustained period of interest rate hikes was always going to dampen total gross lending.

“While we’ve seen an air of stability materialise following a hold on rates, this hasn’t been enough to rejuvenate lending on house purchases and we’re unlikely to see any substantial improvement until such time that the base rate is reduced.”

He added: “The good news is that this decision could come within the next few months and, when it does, it will bring a much-needed boost to mortgage market sentiment.

“In the meantime, it’s those who already have a mortgage in place who are driving market activity, with the more stable landscape allowing them to better assess their options and remortgage with greater confidence.”