The value of gross mortgage advances fell by £22.9bn in Q1 2023 compared to the previous quarter, the latest Mortgage Lenders and Administrators Return (MLAR) from the Bank of England (BoE) has found.

The report, which provides data on mortgage lending activities that are provided by 340 regulated mortgage lenders and administrators, found that the latest gross mortgage advances were also 23.6% lower than Q1 2022, which was the lowest observed since Q2 2020.

Furthermore, the value of new mortgage commitments (lending to be agreed in the coming months) in Q1 2023 was 16.1% less than the previous quarter, falling by 40.7% compared to Q1 2022. This is also the lowest observed since Q2 2020.

Although the outstanding value of all residential mortgage loans was 2.7% higher than a year earlier (£1,675.4bn), Q1 2023 was the first time that this value had decreased on the previous quarter since Q2 2017.

The report also found that the share of gross mortgage advances with interest rates less than 2% above bank rate was 93.9% in the last quarter, 7.7 percentage points above Q1 2022. This figure was also the highest seen since Q2 2008.

Chief revenue officer at Phoebus Software, Adam Oldfield, commented: “The figures from the BoE today confirm the downward trend in mortgage lending. Understandable, when you consider the turmoil in the final quarter of 2022.

"Q2 is likely to show the trend turning upward but, unfortunately, that may well be short lived as the Bank continues to struggle to bring inflation under control. We only have just over a week to wait to find out what the MPC will decide regarding interest rates, but in truth we are all just waiting to see how big the increase is, rather than whether there will be one. The coming months are going to be testing for the housing market, which bears the brunt of these rate rises.”

Head of personal finance, Hargreaves Lansdown, Sarah Coles, added: “Mortgage borrowing plunged in the first three months of 2023, as higher rates took their toll on our enthusiasm for property. There’s every sign they will sink even lower, as approvals for the coming months dropped too. And rate hikes in recent weeks risk sending them to rock bottom. Meanwhile, arrears have started to climb.

“Mortgage borrowing fell off a cliff at the start of this year – down almost a quarter from a year earlier. Plenty of buyers who completed sales at this stage were likely to have been hunting for a mortgage at the worst possible time – when rates shot up in the aftermath of the mini budget. And for every determined buyer who saw it through, there will have been more who were scared back into the rental market.

“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% 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.”

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