Mortgage lending increased in Q4 2024, with increased lending to first-time buyers, however, new arrears cases continued to rise, according to the latest Mortgage Lenders and Administrators Statistics (MLAR) from the Bank of England.
MLAR is a quarterly statistical release aggregated from data on mortgage lending activities provided by around 340 regulated mortgage lenders and administrators.
The latest figures show that the outstanding value of all residential mortgage loans increased by 0.5% from the previous quarter to £1,678.2 billion, the highest stock of outstanding mortgage loans since reporting began in 2007, and was 1.3% higher than a year earlier.
The value of gross mortgage advances increased by 4.9% from the previous quarter to £68.8 billion, the highest new advances since Q4 2022, and was 29.9% higher than a year earlier.
The value of new mortgage commitments (lending agreed to be advanced in the coming months) also increased by 4.9% from the previous quarter to £69.3 billion, the highest since Q3 2022, and was 50.7% higher than a year earlier.
The share of lending to first-time buyers increased by 0.3pp from the previous quarter to 29.6%, the highest share since reporting began in 2007, and was 1.9pp higher than a year earlier.
The proportion of lending to borrowers with a high loan-to-income ratio also increased by 0.5 pp from the previous quarter to 45.8%, the highest since Q4 2022, and was 3.1pp higher than a year earlier.
The share of gross residential mortgage advances decreased by 0.8pp from the previous quarter to 63.7%, but was 3.9pp higher than a year earlier.
Conversely, the share of gross advances for residential remortgages increased by 0.7pp from the previous quarter to 23.5%, but was 4.8pp lower than a year earlier.
New arrears cases increased by 2.3pp from the previous quarter to 12.0%, but remained 1.5pp lower than a year earlier.
The value of outstanding mortgage balances with arrears increased by 1.3% from the previous quarter to £22.1 billion, and was 8.4% higher than a year earlier. The proportion of the total mortgage loan balances with arrears, relative to all outstanding mortgage balances, has stayed the same as the previous quarter at 1.3%, and was 0.1pp higher than a year earlier.
Richard Pike, chief of sales and marketing at Phoebus Software, said: "The latest FCA data shows a continued recovery in mortgage lending, with gross advances and new commitments reaching their highest levels since 2022. 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.
"Proactive arrears management will 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. The focus now will be on ensuring that these interventions continue to be effective in maintaining stability for both borrowers and the wider market."
Holly Tomlinson, financial planner at Quilter, added: "The latest mortgage lending data highlights a housing market that, despite ongoing economic uncertainty, remains remarkably resilient. The total outstanding value of residential mortgage loans has reached a record high of £1,678.2 billion, reflecting steady demand even as affordability remains a challenge. Mortgage lending is picking up, with gross mortgage advances rising nearly 5% on the quarter to £68.8 billion — the highest level since the end of 2022.
"More strikingly, new mortgage commitments have surged by over 50% compared to a year ago, indicating that many buyers and homeowners are keen to secure finance despite ongoing concerns over interest rates and house price trends. People are clearly adjusting to what is the new normal when it comes to mortgage rates. This has also translated into people being much more prepared for their fixed term deals coming to an end. For example, clients are getting in touch 12 to 18 months in advance wanting confirmation on what they can borrow so that when the time comes, they are able to get the best possible rate.
"First-time buyer activity remains incredibly resilient despite significant headwinds. The share of lending to first-time buyers has reached its highest level since records began in 2007. This suggests that, despite stretched affordability and mortgage rates that remain elevated compared to the ultra-low levels of recent years, many are still determined to get onto the property ladder. Many first-time buyers are taking shorter term fixed rates due to optimistic views of the future of the market. However, the ability to borrow is being pushed to its limits, with lending to borrowers at high loan-to-income ratios also on the rise. This reflects the reality that buyers, particularly in pricier areas, are needing to stretch their incomes further to access homeownership.
"Looking ahead, interest rates will remain a key factor shaping the market. While expectations are growing that the Bank of England cut rates further later this year, there is still uncertainty over when and by how much. Many lenders have already lowered mortgage rates slightly, but with borrowing costs still higher than they were a few years ago, affordability pressures persist. Changes to stamp duty in 2025 could also weigh on demand, particularly for first-time buyers who currently benefit from higher tax-free thresholds. With affordability still stretched, borrowers should remain cautious about overextending themselves. That said, the market remains active, and for those able to secure a mortgage at a manageable rate, there are opportunities to be found."
