According to the Bank of England’s Mortgage Lenders and Administrators Return report, the value of gross mortgage lending was 22.7% higher than a year ago.
Further, the value of new mortgage lending agreed to be advanced in the coming months was £79.4bn, 1.6% up from the previous quarter. This was the highest figure since Q3 2022, and a 20.3% increase on the same period in 2024.
BTL lending falls, FTB lending stays flat
Of this, 91.8% of mortgage lending went to owner-occupiers while 8.2% was for buy-to-let (BTL) purposes.
BTL lending declined by 1% compared to the previous quarter. Although this was the largest quarterly fall since Q3 2024, the share of BTL mortgage lending was 0.2% higher than last year.
Among the mortgages provided to owner-occupiers, the share of lending for remortgages fell by 0.4% quarter-on-quarter to 28.6% of the market. Still, this was 5.8% higher than the year before.
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Some 58.6% of lending was for owner-occupier house purchase, 5.8% lower than the year before. Meanwhile, there was a 1.1% quarterly fall in the share of lending for further advances and other mortgages, including lifetime mortgages, to 4.7%. This was the largest decrease since Q3 2016, and 0.1% lower than the year before.
Of the 58.6% in advances for house purchases, lending to first-time buyers was flat on the previous quarter at 27.4% but remained 1.9% higher than the year before. Homemovers accounted for a 31.2% share of lending in Q3, a 2.5% rise on Q2 but 3.9% down on the previous year.
The share of mortgages advanced with interest rates less than 2% above the base rate, including at or below the base rate, rose by 0.4% quarter-to-quarter to 95.5% of lending in Q3. This was 1.4% down on the year before.
The share of advances with rates between 2% and up to 3% above the base rate fell by 0.1% to account for 2.7% of gross mortgage lending in Q3, but was 1.1% higher than the year before.
There was a 0.2% fall in the proportion of lending with interest rates 3% or more above the base rate to make up 1.8% of gross advances in Q3. This marked the first fall since Q2 last year, but was 0.3% higher than the year before.
Richard Pike, chief sales and marketing officer at Phoebus Software, said the figures showed the market was in “rude health” during the summer as borrowers took advantage of lower rates.
Pike added: “Just under half of this lending was to borrowers with [a] high LTI ratio as mortgage companies offer more low-deposit products. This is opening the possibility of homeownership to more people and stimulating market activity but comes with higher risk. The fact that arrears rates are continuing to fall suggests that lenders are getting the balance right here, and demonstrates the resilience of households in the face of cost-of-living pressures.
“It will be interesting to see next quarter’s figures when we’ll see how the uncertainty leading up to the Budget affected borrower behaviour.”
High-LTI mortgage lending surges
The share of lending to borrowers with a high loan-to-income (LTI) ratio was 3.3% higher than the previous quarter at 44.7%, the largest rise in Q3 2020. However, this was 0.6% higher than the year before.
The Bank of England defines borrowers with a high-LTI ratio as borrowers with a single income and an LTI ratio of four or above. The share of this lending rose 0.8% from Q2 to Q3 to 10.9% of lending, the largest rise since the same period last year and 1.4% higher than 2024.
The central bank also considers high-LTI ratio borrowing as those with a joint income and an LTI ratio of three or above. The proportion of this lending was 33.8% in Q3, 2.4% up on the previous quarter – again, the largest rise in five years. By contrast, this was 2% lower than the year before.
The share of gross mortgage lending with loan-to-value (LTV) ratios above 90% was 0.3% higher than the previous quarter at 7.4%, the highest share since Q2 2008. This was also 0.8% up on the year before.
Within this, the share of mortgages advanced with LTVs higher than 95% was flat at 0.5% and 0.2% up on the year before.
Meanwhile, the proportion of gross lending above 75% LTV rose 1.2% from Q2 to Q3, making up 44.6% of the market. This was flat on the year before.
Value of mortgages in arrears falls
The value of outstanding mortgage balances with arrears came to £20.6bn in Q3, 2.9% down on Q2 and 5.8% lower than a year before.
This relates to circumstances where the balance owed is at least 1.5% of the outstanding mortgage or the property is in possession.
Of the £20.6bn of mortgages in arrears, the value of non-regulated mortgages, including BTL and other residential lending where the property is not in use by the borrower, declined by 4% quarterly to £4.7bn. This was 6.7% down on the year before.
The proportion of mortgage balances in arrears relative to all outstanding mortgages was flat compared to the previous quarter at 1.2% and 0.1% lower than the year before.
Some 8.8% of these were new arrears cases, 0.1% down on the previous quarter and 0.9% lower than the year before.
