New lending and first-time buyer activity rise, arrears also increasing
The total value of outstanding residential mortgage loans in the UK reached £1.68 trillion in the fourth quarter of 2024, according to new data from the Bank of England.
The figure marks a 0.5% increase from the previous quarter and a 1.3% rise year over year and also represents the highest recorded level since data collection began in 2007.
Gross mortgage advances rose to £68.8 billion, up 4.9% from the prior quarter and 29.9% higher than a year ago. This was the highest volume of new lending since the final quarter of 2022.
New mortgage commitments — loans agreed but not yet advanced — climbed 4.9% from the third quarter to £69.3 billion. This figure was 50.7% above the same period in the previous year and marked the highest level since the third quarter of 2022.
BoE’s latest Mortgage Lenders and Administrators Return also revealed an increase in lending to borrowers with high loan-to-income (LTI) ratios, with 45.8% of new mortgages falling into this category, up 0.5 percentage points (pps) from the previous quarter and 3.1pps higher year over year.
Owner-occupier house purchase loans made up 63.7% of total mortgage advances, down 0.8pps from the prior quarter but 3.9pps higher than a year earlier. Remortgaging for owner-occupiers accounted for 23.5% of gross advances, a 0.7pps increase from the third quarter but 4.8pps lower than the same period last year.
First-time buyers accounted for 29.6% of total lending, the highest share since records began in 2007. This was up 0.3pps from the previous quarter and 1.9pps year over year.
Mortgage arrears also showed an upward trend. New arrears cases, as a proportion of total outstanding balances with arrears, rose to 12%, a 2.3pp increase from the previous quarter but 1.5pps lower than a year earlier. The total value of mortgage balances in arrears reached £22.1 billion, up 1.3% quarter over quarter and 8.4% higher year over year. However, the proportion of total mortgage balances in arrears remained steady at 1.3% from the previous quarter, up 0.1pps from a year earlier.
“The latest data shows a continued recovery in mortgage lending, with gross advances and new commitments reaching their highest levels since 2022,” commented Richard Pike, chief of sales and marketing at mortgage servicing provider Phoebus Software. “Encouragingly, arrears and possessions have both declined from the previous quarter, suggesting that improving affordability, lender forbearance measures, and stabilising interest rates are helping to ease financial pressures on borrowers.
“While this is a positive development, the broader economic environment remains uncertain. Inflationary pressures have eased, and mortgage rates have continued their downward trend, but household budgets are still under strain from high living costs. The industry will be watching closely to see if this reduction in arrears is the start of a sustained trend or a temporary dip as borrowers adjust to new financial realities.
Pike stressed that proactive arrears management would remain critical, particularly with a significant volume of fixed rate deals due to mature in 2025.
“Lenders have increasingly turned to data-driven approaches to identify at-risk borrowers early and offer tailored support,” he said. “The focus now will be on ensuring that these interventions continue to be effective in maintaining stability for both borrowers and the wider market.”
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