Value of new mortgage commitments fall sharply

Posted on Wednesday, March 15, 2023

The value of new mortgage commitments in the final quarter of 2022 fell to £58.4bn, down 33.5% from from Q3 2022, according to the Bank of England’s latest Mortgage Lenders and Administrators Statistics report.

The Bank of England says that the £87.8bn recorded in Q3 20222 is the lowest level for this metric witnessed – excluding the Covid period – since the first quarter of 2015.

Meanwhile, the value of gross mortgage advances in Q4 2022 was £81.6bn, which compares to £85.9bn in the quarter previous.

But while this number fell on the quarter, it was 16.3% more than seen in Q4 2021, when the value of gross mortgage advances came to £70.2bn.

Meanwhile, the outstanding value of all residential mortgage loans as 2022 came to a close was £1.68tn – 3.9% more than in Q4 2021.

The Bank’s data also reveals that the value of outstanding balances with arrears grew for the first time since the first quarter of 2021.

This value increased by 4.6% compared to Q3 2022 and 1.3% on the year before, to £13.6bn.

Simon Webb, managing director of capital markets and finance at LiveMore, commented: “New mortgage commitments fell by a third in the last quarter of 2022 compared to the previous quarter to £58.4 billion. The downturn is a consequence of rising interest rates. It is also down to uncertainty in the economy and housing market, low consumer confidence, high inflation and the rising cost of living.”

“Whilst mortgage rates have reduced since the peak of early 2023, much uncertainty remains in the market.  Some lenders are reducing rates, other are increasing and swap markets continue to be volatile.  The failure of Silicon Valley Bank and its associated impacts is also starting to flow through to markets and adding to uncertainty and driving volatility.  For mortgage lending to rise to previous levels, stability in the market needs to return.”

Andrew Gething, managing director of MorganAsh said: “When you also consider an increase of mortgages with LTV ratios exceeding 90%, the number of active borrowers who may now be in a financially vulnerable position is concerning. What we don’t know is the compounding impact of those with consumers with health or lifestyle vulnerabilities, who typically suffer more.  This is a key reason why the new Consumer Duty regulation has been introduced, to ensure financial services not only better identifies but protects the most vulnerable for the long term.

“Under the new rules, firms are duty bound to ensure customers achieve good outcomes throughout the lifetime of the product. This simply isn’t possible though if firms do not have the means to measure all types of vulnerability consistently and monitor customer outcomes. This must be a priority in a high interest economy and as more borrowers potentially fall into the vulnerable category.

“Many advisers and brokers will say looking after vulnerable consumers has been a priority all their professional life. This is undoubtedly true – but Consumer Duty has increased the scope of vulnerabilities we need to consider, the evidence we need to keep and the actions we need to take. We are no longer just concerned with financial vulnerabilities, but all potential issues including health and lifestyle, domestic abuse and divorce to name just a few.”

Via @PropertyIndustryEye