Mortgage lending edged towards £1.5 trillion as the decade drew to a close, in a broadly upbeat end of year report from the Bank of England, but experts have warned against complacency as coronavirus hits.

The outstanding value of all residential mortgage loans was £1,499 billion in the last quarter of 2019, higher by 3.8 per cent than a year earlier.

Borrowers were also happy to take on new mortgage commitments at the end of 2019, despite political uncertainty due to the General Election. 

New mortgage lending in the fourth quarter was £70.6 billion, 4 per cent higher than the previous year.

Mortgage rate bargains may have been the attraction. 

The share of gross advances with interest rates less than 2 per cent above Bank of England base rate was 85.3 per cent, a 1.4 percentage point increase on a year ago, and the highest share since autumn 2008.

Property prices slowed, and in some cases fell last year, as buyers worried about fraught Brexit negotiations and the impact of a change of government. 

But after a decade of increases, the dent in asking amounts seemingly failed to help buyers into smaller mortgages.

The share of mortgages advanced in the final quarter of 2019 with loan-to-value ratios exceeding 90 per cent reached 5.7 per cent, according to the Bank of England figures. That was 1.4 percentage points higher than a year earlier. 

Distressed mortgage lending fell, however. The value of outstanding balances with some arrears fell by 2.1 per cent over the quarter to £13.4 billion, and now accounts for 0.89 per cent of outstanding mortgage balances.

Spicerhaart Corporate Sales managing director Mark Pilling says: “The Q4 arrears figures from the Bank of England are broadly positive, showing another fall on the back of previous quarters.

“With the coronavirus Covid-19 already beginning to cause real disruption to businesses and people’s livelihoods, it remains important that lenders have a flexible attitude and continue to seek outcomes that are right for customers. 

“There is a strong likelihood that arrears will rise as a result of the virus, and the measures imposed to slow down its spread. Lenders need to be ready for a situation where people are facing real financial difficulties through no fault of their own.”

Buy-to-let lending remained flat, with the share of gross mortgage lending for that purpose (covering house purchase, remortgage and further advance) at 12.4 per cent, consistent with the fourth quarter in 2018.

The Mortgage Lenders and Administrators Return is a quarterly statistical release aggregated from data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.