The outstanding value of all residential mortgage loans in the UK stood at £1.65trn at the end of Q1 this year, down slightly by 0.1% from the previous quarter.

According to new figures published by the Bank of England (BoE), the latest total was 1.4% lower than at the same time last year.

The value of gross mortgage advances was down by 2.6% from the previous quarter to £51.6bn in Q1, the lowest level since Q2 2020, and was 12.0% lower than a year ago.

The Bank’s figures also revealed that the value of new mortgage commitments, which concerns lending agreed to be advanced in the coming months, increased by 30.8% from the previous quarter to £60.1bn. This figure was 31.2% greater than during Q1 in 2023.

Head of product at MPowered Mortgages, Peter Stimson, commented: “This jump in demand can be traced back to the flurry of mortgage rate reductions made by lenders at the start of 2024 in response to falling swap rates, which made borrowing cheaper and kick-started demand from many of the would-be homebuyers who sat out 2023.

“However, the cost of borrowing has risen steadily since then, leading to a cooling of demand from movers and first-time buyers. Remortgages once again account for nearly a third of new lending to owner-occupiers.”

For borrowers with a high loan-to-income (LTI) ratio, the proportion of lending to this group fell by 3.0 percentage points from the previous quarter to 39.7%, and was 4.1 percentage points down from a year ago. This latest level was also the lowest since Q1 2016.

In terms of arrears, new cases were down by 2.0 percentage points from the previous quarter, to 11.4% of the total outstanding balances with arrears. This was the lowest since Q3 2022 and 4.7 percentage points lower than Q1 last year.

The value of outstanding mortgage balances with arrears increased by 4.2% from Q4 2023, to £21.3bn, and this was 44.5% up on Q1 last year. The Bank’s data also indicated that the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.23% to 1.28% – the highest since Q4 2016.

“Today’s uptick in unemployment will add further weight to calls for the Bank of England to start cutting Base Rate as soon as possible, but few expect rate cuts to come before August at the earliest,” Stimson added.

“Until that happens, lenders will continue to compete on rate in very narrow bands, and progress on both new lending and home sales is likely to remain subdued at best.”

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