Lending also increased from £15.9bn in the previous quarter, a 13 per cent change.
The number of mortgages approved also rose 18 per cent compared to the first three months of 2020, with 118,843 loans authorised between January and March this year. This was slightly down on Q4 however, where lenders approved 121,761 mortgages.
The market share held by building societies remained flat at 23 per cent. Mutuals held outstanding mortgage balances of £342.5bn in Q1.
Robin Fieth (pictured), chief executive of the BSA, said: “The housing and mortgage markets remained at full tilt throughout the first three months of the year as buyers rushed to take advantage of the stamp duty holiday that was originally scheduled to finish on 31 March.”
Some 26,000 first-time buyers received their mortgage through a building society during the quarter.
Looking ahead, Fieth called for a reduction in house prices to support younger buyers and a reconsideration of the stress test in light of low interest rates.
He added: “A levelling-off in house price growth would be welcome, particularly for younger buyers who continue to struggle to raise the necessary deposit or meet the regulatory affordability criteria.
“With interest rates likely to remain low for some time, a reduction in the mandated three per cent stress test would be welcome, although a thorough assessment of a borrower’s ability to repay remains essential.”
Support needed to avoid repossessions
Fieth added: “Although most borrowers who took advantage of a mortgage payment deferral have resumed payments, a small proportion are in longer term financial difficulty even before the government support schemes like furlough finish.
“Lenders will continue to offer tailored forbearance, but it is inevitable that repossession will be the only possible alternative for some, although it remains an absolute last resort for lenders.
He said: “We have been urging the government to do what they did in the financial crisis and reduce the waiting time for government help through the support for mortgage interest (SMI) loan from 39 weeks to 13.
“Repossession brings dislocation and distress – the very last thing that promotes economic recovery. SMI also represents far better value to the taxpayer than rehousing costs and housing benefit.”