The value of new mortgage commitments in the final quarter of last year dropped by 11.9% on an annual basis, totalling £77.3bn, show new figures from the Bank of England (BoE).

And on a quarterly basis, this value fell by 2%. This is a return to pre-Covid 19 levels, says the BoE.

The report also shows that the value of gross mortgage advances during Q4 2021 came to £70.2bn, which is 8.4% lower than a year previous and is the lowest level seen since Q3 2020.

Additionally, the BoE says that the share of gross mortgage advances with an interest rate less than 2% above the bank rate came to 71.3%, which is 6.5 percentage points higher than in Q4 2020.

“[This] increase was driven by the 15 basis point increase in the bank rate in December 2021 rather than any significant change in mortgage interest rates,” states the report.

It also highlights movements in arrears. Between Q3 2021 an Q4 2021, the value of outstanding balances in arrears fell by 2.1% to £13.5bn, making up 0.84% of outstanding mortgage balances.

This is the lowest level seen since this record began in 2007, the BoE cheers.

Coreco managing director Andrew Montlake says that the drop in arrears levels, “is almost certainly a result of the fact interest rates have been at rock bottom for so long and the jobs market has remained pretty robust, despite the pandemic.

“Unfortunately, we may see arrears rise as the BoE raises interest rates to contain inflation and the cost of living squeeze starts to bite. Unsurprisingly, there is a stampede to remortgage and lock into the lowest possible fixed rates at present, before rates inevitably increase further.”

Meanwhile, MT Finance commercial director Gareth Lewis says: “The BoE figures suggest a cooling of the market… which is not surprising given the frenetic pace of activity over the previous 18 months. That pace was not sustainable and with double-digit house-price growth pricing first-time buyers even further out of the market, a more reasonable pace, similar to pre-pandemic levels, is welcome.

“That said, this year has got off to a busy start.

“It will be interesting to see what happens over the coming couple of months with regard to purchase transactions.

“We are likely to see a further increase in base rate and with the bigger lenders starting to raise their mortgage rates, borrowing costs are set to edge up across the board. This may see people clamour to get deals done sooner rather than later, focusing minds on low rates while they are still available, and mean a continuation of these positive figures.”