The outstanding value of all residential mortgage loans climbed to £1.66trn in the second quarter of the year, a figure up 0.4% on Q1.

New figures published by the Bank of England (BoE) also revealed that this was 0.3% up on Q2 in 2023.

The value of gross mortgage advances increased by 16.7% from the previous quarter to £60.2bn, the first increase since 2023 Q3, and was 15.5% higher than a year earlier.

According to the BoE data, the value of new mortgage commitments – which concerned lending agreed to be advanced in the coming months – increased by 11.3% from the previous quarter to £66.9bn and was 12.5% greater than a year earlier.

Sales and growth lead at Target Group, Melanie Spencer, said the figures indicate that borrowers have “responded well” to the positive changes in the market, as the value of both gross mortgage advances and new mortgage commitments increases.

“Growing competition among lenders off the back of movement on swap rates and the bank base rate has clearly helped put a potential move back on the radar for many people,” Spencer said.

The BoE figures also indicated that the value of outstanding mortgage balances with arrears increased by 2.9% from the previous quarter, to £21.9bn, and was 32.0% higher than a year earlier.

Furthermore, the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.29% to 1.32%, which was the highest level since 2016 Q2.

“While it is positive to see a drop in new arrears cases, mortgage balances with arrears continues to increase in value, while total arrears remain far higher than 12 months ago,” added Spencer. “Combine this with a rise in high LTI lending and an increase in higher LTV lending – albeit only marginally – and there’s no question that lenders will need to stay close to number of borrowers.

“A sensible approach to managing the loan lifecycle remains key, as well as both early remediation strategies and identifying vulnerable customers – particularly as Consumer Duty remains a priority for the regulator. This will continue to be the case even as the picture for the market and wider economy seems to improve.”

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