Data compiled by the Bank of England (BoE) and the Financial Conduct Authority (FCA) for the Mortgage Lenders and Administrators Statistics revealed that the value of gross mortgage advances in Q1 came to £58.8bn.
This was a £22.9bbn drop on the previous quarter and 23.6 per cent lower than the same period last year.
The value of new agreed lending came to £48.9bn, which was down by 16.1 per cent on the previous quarter and 40.7 per cent annually.
By the end of Q1, the outstanding value of all residential mortgages was £1.67 trn, which was 2.7 per cent up on a year ago but a slight fall on the previous quarter.
Rise in arrears
Some 93.9 per cent of gross mortgage advances had interest rates that were less than two per cent above the base rate in Q1, which was 0.2 per cent up on Q4 2022. This was 7.7 per cent higher than last year and the highest share of mortgages at this pricing since Q2 2008.
The share of gross mortgage advances priced between two and three per cent higher than the base rate fell from 3.8 per cent to 3.4 per cent, while the proportion of loans priced at three per cent or more than the base rate rose by 0.2 per cent to 2.7 per cent compared to the previous quarter.
The value of mortgages in arrears rose by 9.5 per cent from Q4 2022 to Q1 2023, and 12.5 per cent annually to £14.9bn. BoE said this was the highest since Q1 2021.
The proportion of loans in arrears rose slightly from 0.81 per cent in Q4 to 0.89 per cent in Q1.
High LTI lending drops
Lenders issued fewer loans at high loan to income (LTI) ratios in Q1, as this fell by 5.6 per cent on the quarter to 43.7 per cent of mortgages during the period. This was six per cent lower than the year before and the lowest seen since Q2 2020.
Single income borrowers with an LTI ratio of four or more accounted for 9.1 per cent of gross mortgage lending in Q1, which was a 1.5 per cent decrease on the quarter before. Borrowers with a joint income and an LTI of three or above accounted for 34.6 per cent of new lending, a 4.2 per cent drop on Q4 2022.
The data showed that the share of mortgages lent at 90 per cent loan to value (LTV) or higher fell by 1.1 per cent quarterly to four per cent in Q1. This was flat on the year before.
Within this, some 0.2 per cent of mortgages were advanced at LTVs over 95 per cent, which was also approximately the same as a year ago.
Mortgage advances exceeding 75 per cent LTV fell by 4.5 per cent quarter-on-quarter to 32.5 per cent. The central bank said this was a three per cent drop on the year before and the lowest share seen since Q1 2016.
Buy-to-let mortgage decline
The share of gross mortgage advances for buy-to-let dropped to its lowest since Q4 2011. It accounted for 9.8 per cent of new lending in Q1, which was a 3.6 per cent decline on the same period last year.
Mortgages for owner-occupiers made up 90.2 per cent of gross advances.
Of the mortgages lent to owner-occupiers, remortgages took up 34.8 per cent of advances which was an annual rise of 5.8 per cent. House purchase advances constituted 50.1 per cent of lending, a 5.2 per cent drop on the previous quarter and the lowest share seen since Q2 2020.
Within the mortgages provided for house purchase, lending to first-time buyers rose by 1.3 per cent to make up 22.7 per cent of lending. This was 1.5 per cent lower than in Q4 2020.
Further advances and other mortgages, which include lifetime mortgages, made up 5.3 per cent of gross advances in Q1 which the BoE said was the lowest share since records began.
The proportion of mortgages issued to home movers fell by 1.9 per cent annually to 27.4 per cent. This was 3.8 per cent down on the previous quarter, and again, the lowest since Q2 2020.
A ‘worrying picture’ for the market
Karen Noye, mortgage expert at Quilter, said the data painted a “worrying picture” with more people struggling to pay off their mortgage and fewer people taking out mortgages at all.
She said the impact of this would be felt in house prices, adding: “If repossessions start to increase and the market becomes flooded during a period where demand is lacking it will have a damaging impact on house prices.”
Noye said the picture would get worse in the short term as the mortgage market was once again going through a turbulent period.
“Before these recent developments, the sector was seemingly in a stable state since the spike in rates around November last year. This stability was likely due to the economic outlook looking more predictable with interest rates set to peak at around five per cent,” Noye added.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said there was a chance that mortgage borrowing would fall even further as approvals for the coming months appeared to decline.
Coles added: “Mortgage rates were falling back in early 2023, but this didn’t inspire a wave of approvals. In fact, they were down more than 40 per cent in a year. Mortgage rates remained significantly higher than before the scare in the autumn, and it put a real dent in buyer confidence. The spike of the past few weeks won’t have helped either, so we can expect to see more mortgage misery in the next set of figures.”
She said the rise in people falling behind on mortgage payments was a “worrying development” as even if their rates had not increased, they could still be struggling due to the higher cost of living.
