Yahoo Finance UK mortgage sector going strong despite interest rate hikes
The UK mortgage sector remained robust during the third quarter of the year despite volatility caused by Kwasi Kwarteng’s mini-budget and interest rate hikes, new data has shown.
According to the Bank of England’s (BoE) quarterly update on the mortgage market, gross advances reached £85.9bn during the period.
This was £8bn greater than the previous quarter and 17% higher than in the third quarter of 2021.
However experts have warned that this could start to cool, with more interest rate hikes predicted, and households and businesses struggling with finances.
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The central bank revealed that the outstanding value of all residential mortgage loans was £1,667.1bn ($2048.44bn) at the end of Q3, 4.1% higher than a year earlier.
Meanwhile, the value of new mortgage commitments in Q3 was 4.5% greater than the previous three months, and the highest value recorded since the same period in 2007.
The report is aggregated from data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.
It also showed that the proportion of lending to borrowers with a high loan to income (LTI) ratio increased by 1.0 percentage points on the quarter to 51.5%, the same as 2021 Q2 and the highest since recording began in 2007.
The share for house purchase for owner occupation was 56.1%, up 3.7pp on the previous quarter, but down 2.7pp from a year ago.
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The value of outstanding balances with arrears decreased by 1.4% over the quarter, the BoE revealed, and 5.1% over the year to £13.1bn.
This now accounts for 0.78% of outstanding mortgage balances, the lowest since recording began.
“The mortgage market remained strong through the third quarter of the year despite the Bank of England accelerating its pace of rate hikes,” Andrew Fisher, chief commercial officer at Freedom Finance, said.
“While the Q3 data only briefly covers the market volatility following the mini budget in September, it is evident that appetite for new borrowing through the period was robust and well-met by lenders.
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“It appears likely that the base rate will rise again this week and could increase further in 2023 which will add pressure to the mortgage market, testing the affordability limits for many potential borrowers.”
He added: “Measures from the FCA and the sector, however, mean it is well-placed to continue meeting consumer demand for mortgages from both new and existing borrowers.”
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