Q2 lending was also up 15.5% on the previous year, when lenders advanced £52.1bn of mortgage loans. This was the first increase in quarterly lending since Q3 2023.
However, the value of outstanding mortgage balances with arrears also increased to £21.9bn, 32% higher than a year earlier.
The Mortgage Lenders and Administrators Statistics series for Q2 showed that the value of mortgage approvals rose by 11.3% from the previous quarter to £66.9bn and was 12.5% greater than a year earlier.
The proportion of lending to borrowers with a high-loan-to-income (LTI) ratio increased by 2.7 percentage points (pp) from the previous quarter to 42.5%, but remained 1.2pp lower than a year earlier.
Lending by market share
Meanwhile, the share of lending for house purchases rose by 2.9pp between Q1 and Q2 to reach 57.5%, making it 3.1pp higher than in Q2 2023.
For remortgages, the proportion of lending dipped by 3.3pp from the previous quarter to 28.6% and was 3.7pp lower than a year earlier.
In the buy-to-let (BTL) lending market, covering house purchases, remortgages and further advances, the proportion of lending increased by 0.7pp from the previous quarter to 9% and 0.8pp compared to a year earlier.
New cases of arrears falls
New arrears cases decreased by 0.5pp from the previous quarter to 11% of the total outstanding balances with arrears. This was 5.3pp lower than a year earlier.
As mentioned, the value of outstanding mortgage balances with arrears increased by 2.9% from the previous quarter to £21.9bn, and was 32% higher than a year earlier.
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%, the highest since Q2 2016.
Melanie Spencer, sales and growth lead at Target Group, said: “It’s clear from today’s figures 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.
“While it is positive to see a drop in new arrears cases, mortgage balances with arrears [continue] to increase in value, while total arrears remain far higher than 12 months ago.
“Combine this with a rise in high-LTI lending and an increase in higher-loan-to-value [LTV] lending – albeit only marginally – and there’s no question that lenders will need to stay close to a 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.”
Mortgage momentum could wane
In UK Finance’s Household Finance Review, which was released last week, the trade body said the short boost in applications between late 2023 and early Q1 this year was finally translating into Q2’s growth in lending.
UK Finance said the time it took from application to completion suggested there would be continued mortgage lending growth in Q3 compared to 2023, as applications from Q1 fed through.
However, it said the comparatively low levels of applications in Q2 could dampen this strength through to the end of the year.
This article was first published on Your Mortgage‘s sister site, Mortgage Solutions. Read: Gross mortgage lending rises to £60.2bn in Q2
