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Mortgage activity slows in Q3

  • 15/12/2021
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Mortgage activity slows in Q3
The value of newly-agreed mortgages fell 8.2 per cent in Q3 to £78.9bn as house purchases accounted for a smaller share of activity during the period.


According to the Bank of England’s Mortgage Lenders and Administrators Statistics, the share of mortgages for owner occupation house purchase contracted by 7.6 per cent to 58.9 per cent on the previous quarter. Meanwhile, gross advances for remortgage took up a 22.9 per cent share of activity, representing an increase of 6.4 per cent on Q2. 

Further advances, including lifetime mortgages, made up 6.3 per cent of activity in Q3. 

Lending to first-time buyers rose by 1.4 per cent annually to account for 24.3 per cent of gross advances. However, this was a slip of 0.5 per cent on Q2. Home movers made up 34.6 per cent of advances, a yearly increase of 1.7 per cent but a 7.2 per cent fall on the previous quarter. 

Annually, mortgage advances for owner occupied house purchase in Q3 rose 3.1 per cent on the same period last year, and remortgage activity fell 2.1 per cent on 2020. 

The outstanding value of all residential mortgages totalled £1,601.2bn at the end of Q3, a 4.9 per cent rise than last year. This was also up on the £1,587.6bn total recorded at the end of the previous quarter. 

The share of gross mortgage advances for buy-to-let purposes including purchase, remortgage and further advance was 11.9 per cent in Q3, a fall of 0.6 per cent on the same period last year.  

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “We saw the rise of remortgaging as a percentage of all mortgages, for the first time since the first three months of the pandemic. Much of this will be simply a function of the drop in the number of mortgages for new homes. 

“We can expect remortgage numbers to climb, and mortgages for purchases to hold up reasonably well.” 


Rates climbing 

Some 57.3 per cent of gross mortgage advances had an interest rate which was less than two per cent above the current base rate of 0.1 per cent in Q3. This was 1.1 per cent higher than the share of similar mortgages in Q2. 

The share of mortgages with interest rates between two and three per cent above the base rate fell from 27.2 per cent to 29.3 per cent. Meanwhile, mortgages with rates three per cent or more above the base rate increased by one per cent to a 15.6 per cent share. 

Coles added: “Despite some recent rises, mortgage rates are still incredibly low, and with lockdown savings burning a hole in some people’s pockets, there are still compelling reasons to buy.” 


High LTV lending 

The share of advances with loan to value (LTV) ratios above 90 per cent rose in the quarter by 2.1 per cent to 4.2 per cent. This was the highest share of mortgage lending above 90 per cent since Q2 last year.  

On an annual basis, this was up by 0.6 per cent.  

Within this, the proportion of mortgage advances with LTVs over 95 per cent was 0.3 per cent, relatively unchanged compared to recent quarterly periods. 

The share of mortgages advanced with LTVs exceeding 75 per cent increased by 0.5 per cent quarter-to-quarter to 40.3 per cent. This was also 0.7 per cent up on last year. 


Borrower income and arrears 

During the quarter, borrowers with a single income who had a loan to income (LTI) ratio of 4 or above accounted for 11.2 per cent of gross lending, a 1.2 per cent decrease to the previous quarter. 

Borrowers with a joint income who had an LTI of 3 or above accounted for a 37.2 per cent share of gross mortgage lending, a 1.8 per cent decline on Q2. 

The value of outstanding mortgages in arrears fell by 3.4 per cent to £13.8bn, and now accounts for 0.86 per cent of all outstanding mortgages. 


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