The outstanding value of all residential mortgage loans decreased by 0.1% from the previous quarter to £1,657.6bn, 1.1% lower than a year earlier, The Bank of England has revealed.
According to the Mortgage Lenders and Administrators Statistics for Q4 2023, the value of gross mortgage advances decreased by 13.4% from the previous quarter to £54.0bn, 33.8% lower than a year earlier.
The value of new mortgage commitments – lending agreed to be advanced in the coming months – decreased by 6.6% from the previous quarter to £46.0bn.
If the onset of the Covid-19 pandemic is excluded, this was the lowest observed since 2013 Q1.
The proportion of lending to borrowers with a high loan-to-income (LTI) ratio decreased by 2.6% in Q4 to 42.7% and was 6.6% lower than in Q4 2022.
The share of gross mortgage advances for house purchase for owner occupation increased by 1.0% to 58.7%.
The share of gross advances for remortgages for owner occupation decreased by 0.8% from the previous quarter to 29.7% but was 2.3% higher than a year earlier.
The share of gross mortgage advances for buy-to-let (BTL) purposes – covering house purchase, remortgage and further advance – decreased by 0.5% to 7.0%, the lowest since 2010 Q3, and 4.9% lower than a year earlier.
New arrears cases fell by 2.6% to 13.2%, but remained 0.2% higher than a year earlier.
Karen Noye, mortgage expert at Quilter, said: “New Mortgage Lenders and Administrators statistics for Q4 2023 paint a very worrying picture of the mortgage market.
“The statistics show that the value of outstanding mortgage balances with arrears is over 50% higher than it was a year ago and has shot up nearly 10% (9.2%) in just one quarter.
“This shows that the large increase in mortgage rates seen over the last couple of years is really starting to bite for some borrowers and this is unfortunately causing them to fall into arrears as they simply can’t afford to keep up with their increased payments.”
She added: “The changes to National Insurance and Child Benefit at the Budget last week, will barely help considering many people will have seen their mortgage payments shoot up by £300 or more a month.
“For those worried about falling into arrears, it is important to contact your lender as soon as possible as there are options that can help ease the pain such as going onto a cheaper interest only mortgage or setting up a payment plan.
“Discussing the problem and not burying your head in the sand is crucial though.
“Positively, the statistics show that new arrears cases decreased by 2.6% from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2% higher than a year earlier.
“This may well continue to climb again though as more people come off fixed term mortgages set when rates were low.”
Noye continued: “Elsewhere, the data points to a market in a deep freeze similarly suffering from the higher rates.
“While house prices have remained resilient, the value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 6.6% from the previous quarter to £46.0 billion, and was 21.2% lower than a year earlier.
“This illustrates a serious lack of demand and although prices continue to be buoyant if this dearth in demand continues prices may return to a downward trajectory.
“The various measures to make the buy to let market less attractive by the Government are clearly having their intended impact as the share of gross mortgage advances for buy-to-let purposes (covering house purchase, remortgage and further advance) decreased by 0.5% from the previous quarter to 7.0%, the lowest since 2010 Q3.
“The changes to the holiday let rules at the Budget may also make things even worse for landlords who have been hit with numerous changes to the buy to let tax landscape in recent years making it a less attractive option. This has resulted in many leaving the market.”
