Arrears fall to lowest since mid-2023 and new commitments surge as remortgaging activity gathers pace
The UK mortgage market showed resilience in the first quarter of 2026, with arrears declining to their lowest level in nearly three years and new commitments rising sharply, even as gross advances fell.
According to the latest Bank of England's latest mortgage lenders and administrators statistics, outstanding residential mortgage balances rose 0.7% quarter-on-quarter to £1,75 trillion, representing annual growth of 2.6%.
Gross advances contracted 12.3% from the prior quarter to £69.6 billion — 10.2% below the year-earlier level — but new mortgage commitments climbed 11.5% to £78.0 billion, a 14.2% annual increase, pointing to strengthening demand heading into the second quarter.
Outstanding balances in arrears fell 1.7% to £20.1 billion, the lowest since Q3 2023, and were 6.3% below year-earlier levels. Arrears as a proportion of all outstanding balances held broadly steady at 1.1%, a 0.1 percentage point improvement on the prior year.
Remortgaging activity continued to build, with the share of owner-occupier remortgages rising 2.7 percentage points quarter-on-quarter to 28.1% of gross advances — 6.8 percentage points higher than a year earlier. Owner-occupier house purchase lending fell 3.9 percentage points to 57.7%, and was 8.6 percentage points below the prior year. Buy-to-let advances edged up 0.5 percentage points to 8.9%.
The share of advances carrying interest rates less than two percentage points above Bank Rate eased 0.2 percentage points to 94.7%, its lowest since Q1 2023. High loan-to-value lending also moderated, with the share of advances above 90% LTV falling 0.3 percentage points to 8.0% — the first quarterly decline since Q4 2024 — though the proportion remained 1.4 percentage points higher than a year before.
"The Bank of England's latest figures indicate the mortgage market made a steady start to 2026," said Richard Pike (pictured right), chief sales and marketing officer at financial services software provider Phoebus. "The fall in gross mortgage advances shows the market was still weak at the start of the year, but the rise in commitments shows that confidence was picking up in Q1 before the market shocks caused by the Iran conflict."
Pike highlighted the ongoing shift towards remortgaging as a structural feature of the market. "This will remain a defining feature of the market throughout the year, as households continue to adapt to a higher rate environment," he said.
Pike acknowledged a gradual rise in possession activity but said it did not warrant alarm, adding that lenders should ensure servicing teams remained equipped to support vulnerable customers.
"Looking ahead, the key challenge for the market will be balancing affordability constraints with the need to support lending growth," he said. "While I expect to see modest growth over the course of the year, sustained momentum will depend on further improvements in consumer confidence and greater certainty around the interest rate outlook."
Meanwhile, Rob Clifford (pictured right), chief executive of mortgage and protection network Stonebridge, urged caution in interpreting the headline figures, noting that last year's stamp duty deadline had skewed year-on-year comparisons in both directions.
"It looks like a contraction and an expansion at the same time if you look at what happened to lending and new commitments in the first quarter, but these wild swings in the numbers are really just a mirage," Clifford said. "Ignoring the annual figures this time around is the only way to take the temperature of the market, all thanks to a distortion last year.
"There's still plenty of momentum out there. In fact, despite the invasion of Iran in February, new mortgage approvals are holding their own and were up significantly the very next month, also rising year on year."
"Even if the unresolved situation in the Middle East and rising borrowing costs does dent new home purchases, we're still in the midst of a remortgaging wave due to a pandemic boom in transactions five years ago, and this will smooth out the effect of any volatility for advisers who position themselves well in the coming months."
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