Bank of England: UK Mortgage Advances Jump 36.9% in Q3

The Bank of England recently released new mortgage lending statistics. These figures indicate a significant increase in UK home loan activity. Gross mortgage advances, primarily for purchases and remortgaging, rose by 36.9% in Q3. This pushed the total to £80.4 billion.

This advance represents the strongest quarterly rise since Q3 2020. The value of new home loans also climbed 22.7% compared to the same period in 2024. New mortgage commitments followed this trend. They increased 1.6% quarter-on-quarter, reaching £79.4 billion. This marks the highest level since Q3 2022. This figure is also 20.3% higher than a year ago.

The outstanding value of all residential mortgage loans grew 0.9% over the quarter. This brought the total to £1,733.7 billion. Over the year, this figure shows a 2.9% increase.

The data also points to increasing financial stretching by borrowers. The share of advances with loan-to-value (LTV) ratios above 90% increased. This reached 7.4%. This represents the highest level since Q2 2008. Borrowers also took on higher loan-to-income (LTI) ratios. This share jumped 3.3 percentage points, reaching 44.7%. This rise is the largest since Q3 2020.

Owner-occupiers drove a larger share of house purchase loans. Their share climbed to 58.6%. This share remains 5.8 percentage points lower than a year ago. Remortgaging for owner occupation dipped slightly. It settled at 28.6%. This figure is 5.8 percentage points higher than last year.

Positive news emerged regarding mortgage arrears.

The value of balances with missed payments decreased 2.9%. This brought the total to £20.6 billion. This sum is 5.8% lower than a year earlier. The proportion of all outstanding mortgage balances in arrears held steady at 1.2%. New arrears cases fell to 8.8%. This marks the lowest level since Q1 2022.

Ian Futcher, a financial planner at Quilter, commented on the figures. He stated mortgage lending has increased significantly. He cautioned this follows a period of slow housing market activity. High interest rates and affordability concerns limited many potential buyers.

Futcher noted gross mortgage advances rose almost 37% from the prior quarter. They stand nearly a quarter higher than one year ago. New mortgage commitments reached their highest point since late 2022. He stressed the difficulty for new buyers. Lending above 90% LTV shows its highest share since before the financial crisis. A growing proportion of borrowers extend their incomes to secure a home.

Futcher found reassurance in falling mortgage arrears.

These remain low compared to last year. The market shows signs of improvement from a weak starting point. Yet, affordability challenges persist as a central issue.

Peter Stimson, director of mortgages at MPowered Mortgages, offered a different perspective. He warned the numbers reflect an outdated market situation. Stimson described the Bank's data as a snapshot of the past. Most Q3 completions originated from summer applications. This occurred before pre-Budget uncertainties impacted market activity.

Demand for home purchase mortgages dropped sharply before the Budget. Buyers reacted to rumors of significant tax increases on property. Remortgaging activity remained stable. Stimson predicted the Budget's effect would appear in future data. He sees the Q3 data as a high water mark.

Stimson forecasts a strong start to 2026 for the market.

He believes the Bank of England will cut its base rate below 4% by Christmas. Another cut to 3.5% will follow in February. This should revive demand.

Lenders have already factored in these base rate reductions. Competition among lenders will intensify. They will compete for shares of the recovering market. You must understand these market dynamics. Prepare your finances carefully. Consider your borrowing capacity against future rate changes. Monitor official announcements from the Bank of England. Evaluate your financial position regularly. Make informed decisions for your mortgage needs.