The Q2 statistics from the Bank of England Mortgage Lenders and Administrators Return (MLAR) show an increase of 0.3% in the outstanding value of all residential mortgage loans compared to the previous quarter. The total of £1,703.6 billion is 2.6% higher than the same period last year.
The value of gross mortgage advances decreased by 24.2% from the previous quarter to £58.8 billion, the lowest since 2024 Q1 and 2.4% lower than a year earlier. The value of new mortgage commitments increased by 14.6% from the previous quarter to £78.2 billion, the highest since 2022 Q3 and 16.8% higher than a year earlier.
The share of gross mortgage advances with loan-to-value ratios exceeding 90% has increased by 0.4 percentage points from the previous quarter to 7.1%, the highest share since 2008 Q2 and 1.1pp higher than last year.
The proportion of lending to borrowers with a high loan to income ratio decreased by 3.7pp from the previous quarter to 41.5%, the largest decrease since 2023 Q1 and 1.0pp lower than a year earlier. The share of gross mortgage advances for house purchase for owner occupation decreased by 10.3pp from the previous quarter to 56.0%, the lowest share since 2024 Q1 and 1.4pp lower than a year ago.
The share of gross advances for remortgages for owner occupation increased by 7.7pp from the previous quarter to 29.0%, the highest share since 2024 Q1 and 0.4pp higher than a year ago.
New arrears cases decreased by 0.4pp from the previous quarter to 8.8%, the lowest since 2022 Q1 and 2.2pp lower than a year earlier. The value of outstanding mortgage balances with arrears decreased by 1.0% from the previous quarter to £20.9 billion, the lowest since 2023 Q4 and 4.6% lower than last year.
Richard Pinch, senior director of risk at financial services consultancy Broadstone, said the data paints a reassuring picture of stability in the mortgage market – but warned there may be trouble ahead:
“Arrears have fallen to their lowest levels since 2023, with new arrears cases also dropping back sharply – evidence that the impact of the cost-of-living crisis and higher rate environment continues to reduce. The recent Bank of England rate cut will feed through to those on variable rates and those looking for new mortgages providing further benefit.
“That said, this stability comes against a backdrop of uncertainty. With the Autumn Budget confirmed for 26th November, tax rises and possible property measures remain a concern. With households still facing higher living costs amid a fragile jobs market, there remains a risk that mortgage strain could return.”
Martyn Smith, CEO at Black & White Bridging, said the outlook is one of increasing buyer confidence:
“Although the value of gross mortgage advances is down on last quarter, new mortgage commitments and remortgages are on the up, a clear sign of increased borrower activity, likely spurred on by the recent base rate cut.
“We can see evidence here of increasing appetite even amongst those with smaller deposits as the share of advances with LTV ratios exceeding 90% rose again to 7.1%, the highest figures since 2008. Of course, this is also reliant on increased risk-taking from lenders, which is clearly necessary with rising inflation putting pressure on the cost of living and a buyer’s capacity to save.
“Although it would hit savings, further interest rate cuts are the only way to increase buyer confidence further and keep up borrower momentum. Lenders will need to remain agile and flexible to those with lower up-front deposits, at least until the inflation versus base rate balance settles.”
Karen Noye, mortgage expert at Quilter, suggested the share of mortgages with loan-to-value ratios exceeding 90% reflects increased risk-taking from lenders. She added:
“While this may once have been cause for concern, the strict lending criteria and stress testing rules in place today mean even in the volatile interest rate environments, customers should still be able to afford their mortgages.
“Meanwhile, new arrears cases as a proportion of outstanding balances decreased to the lowest level since the start of 2022, reaching 8.8% which is down from the previous quarter and lower than a year ago. The total value of mortgage balances in arrears also fell by 1% on the quarter to £20.9 billion. This is the lowest level since the end of 2023 and is 4.6% lower than the same period the year prior. This is a positive sign that household finances are on a better footing compared to the depths of the cost of living crisis.”
However, she warned that property tax speculation could but a brake on activity:
“Budget rumours are also adding to the uncertainty and talk of new property-related taxes could result in would-be sellers putting their plans on hold until they have a clearer picture, so there is still a risk that the market stalls further in the near term.”
See the full analysis at https://www.bankofengland.co.uk/statistics/mortgage-lenders-and-administrators/2025/2025-q2
