The outstanding value of all residential mortgage loans across the UK has risen by 4.6% in the last year, new figures published by the Bank of England (BoE) have revealed.

The total sat at £1,584.1bn at the end of the second quarter.

Figures also showed that the value of gross mortgage advances in Q2 was £89.0bn, more than double the amount seen in Q2 last year, and the highest level since Q3 2007.

The Bank also stated that the value of new mortgage commitments, which involves lending agreed to be advanced in the coming months, was almost 2.5 times greater than a year ago. This sat at £85.6bn at the end of Q2 but remained £2.1bn lower than the recent peak seen in Q4 2020.

Quilter mortgage expert, Karen Noye, commented: “Many will see the news that the value of gross mortgage advances are now the highest since 2007 as cause for concern as the pain of the financial crash in 2007/08 remains front of mind. The fact that today’s Q2 figures are over double the amount seen in Q2 2020 shows as clear as day how impactful the stamp duty holiday has been.

“Mortgage lending and therefore house prices are likely to remain stable or drop slightly over the next few months and then slump further when we get to the depths of winter. The majority of buyers have already seen the stamp duty holiday be significantly reduced and it will completely go at the end of this month.

“Without that impetus there may be a reluctance from buyers to splash out on new homes as the economic realities of the pandemic start to bite. With inflation set to soar there could be a change to interest rates which will impact people’s ability to afford mortgage payments.

“If there is also more unemployment, then surplus housing stock will hit the market as people go into arrears and the laws of supply and demand will push house prices down further.”

According to the BoE figures, the share of mortgages that advanced in Q2 and had LTV ratios exceeding 90% was 2.0%. This was 2.8% lower than a year ago, but a slight increase compared to the previous quarter.

The value of outstanding balances with some arrears also decreased by 6.3% over the quarter to £14.1bn, but this still accounts for 0.89% of outstanding mortgage balances.

Noye added: “The silver lining is that any reduction in house prices could help the vast population of younger first-time buyers shut out of the market at the moment due to the spike. The next couple of years may prove to be a golden opportunity for generation rent.

“However, today’s data shows there has not been a huge rise in the number of 90% LTV or above mortgages as they remain 2%, lower than a year earlier but are slightly increased compared to the previous quarter. The new government backed 95% mortgage scheme should start to boost these figures as it helps buyers with smaller deposits get on the housing ladder.”

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