BoE: Arrears at lowest level since 2007

The total number of loan accounts with reportable arrears also continued to decrease - from 279,649 in the third quarter of 2013 to 264,862 in the final quarter, a reduction of 5.3% and the lowest since the first quarter of 2007.

The performance of loans in arrears – payments received as a percentage of payments due – improved for the sixth quarter in succession to 61.9% in the fourth quarter of 2013.

Arrears totalling £32m on 8,191 accounts were capitalised in Q4 2013, an increase of 2.2% by number compared to the third quarter 2013.

The statistics also revealed that gross advances were also at the highest level since 2008, with lending to first-time buyers at its highest level since the third quarter of 2007.

The value of loans advanced to first-time buyers increased by £3.1bn over the past year to £10.6bn, an increase of 41%.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “The proportion of lending to first-time buyers increased as borrowers took advantage of the early introduction of the second phase of Help to Buy, and lenders who are not participating in the scheme extended their range of high loan-to-value products.

“The value of loans advanced to first-time buyers hit the levels last seen in the third quarter of 2007, illustrating that this important sector of the market has well and truly returned.”

There was also an increase in the value of new lending for buy to let over the past year – up from £4.3bn advanced in Q4 2012 to £6.6bn in Q4 2013. This was the highest quarterly amount since Q2 2008.

Harris said: “Buy-to-let lending also continued to pick up, as investors shunned poor rates on savings accounts, choosing instead to invest their money in property.

“With rental yields higher than savings rates, and lenders offering cheaper mortgages with looser criteria, it is no surprise that the buy-to-let sector continues to expand.

“Of course, this makes it harder for first-time buyers to get on the housing ladder as they are competing with landlords for property and in cities such as London there is limited supply in the first place.

“The mortgage market has continued to perform well into this year, with plenty of competitively priced products available.

However, the Mortgage Market Review will be introduced next month and there are fears that this will make it much harder to get a mortgage.

“While we believe there will be a slowdown as lenders ensure everything is functioning as it should be, many of them have already introduced the changes so it should largely be 'business as usual' for good quality borrowers who don't have issues with their credit history. It will also provide a welcome boost for brokers who will be able to interpret the new rules and guide borrowers through them.”