Bank of England major update amid ‘36.9%’ surge | Personal Finance | Finance
A surge in home loans has delivered the biggest jump in new advances in five years, according to new Bank of England figures. The value of gross mortgage advances – largely for purchases and remortgaging – leapt by 36.9% in the third quarter compared with the previous three months, hitting £80.4 billion.
That is the strongest rise since Q3 2020, while the value of new home loans was also 22.7% higher than the same period in 2024. The Bank said the outstanding value of all residential mortgage loans rose 0.9% on the quarter to £1,733.7 billion, up 2.9% over the year.
New mortgage commitments increased too, up 1.6% on the quarter to £79.4 billion, the highest level since Q3 2022, and 20.3% above a year earlier.
But the numbers also highlight how borrowers are stretching further to get on the housing ladder. This is because the share of advances with loan-to-value ratios above 90% rose to 7.4%, the highest since Q2 2008 and an ending to those taking on high loan-to-income ratios jumped 3.3 percentage points to 44.7%, the biggest rise since Q3 2020.
Meanwhile, the share of loans for house purchase by owner-occupiers climbed to 58.6%, though this remains 5.8 percentage points lower than a year ago. Remortgaging for owner occupation dipped slightly to 28.6%, but is 5.8 percentage points higher than last year.
Arrears improved, with the value of balances with missed payments falling 2.9% to £20.6 billion, 5.8% down on a year earlier. The proportion of all outstanding mortgage balances in arrears stayed at 1.2%, while new arrears cases fell to 8.8%, the lowest since Q1 2022.
Quilter financial planner Ian Futcher said: “Mortgage lending has picked up meaningfully in the latest figures, but it’s important to remember this comes after a very slow year in the housing market. High interest rates and affordability pressures kept many would-be buyers on the sidelines.”
He added: “Gross mortgage advances jumped by almost 37% compared to the previous quarter and are now nearly a quarter higher than a year ago, while new mortgage commitments reached their highest level since late 2022.
“Even so, the data shows how tough it remains for those trying to buy. Lending at over 90% loan-to-value has risen to its highest share since before the financial crisis, and a rising proportion of borrowers are stretching their incomes further to secure a home.”
“There is some reassuring news, with mortgage arrears still very low and falling versus last year… The market is improving from a weak base, but affordability challenges remain front and centre.”
Peter Stimson, director of mortgages at MPowered Mortgages, cautioned that the numbers reflect a market picture that is already out of date.
He said the Bank’s data “captures a 4K, ultra HD snapshot of how the mortgage market was, not how it is”, noting that most Q3 completions stem from summer applications “before pre-Budget paralysis hit the pause button on much of the market.”
“For several months leading up to the Budget, demand for home purchase mortgages fell sharply as buyers were spooked by rumours of big tax rises on buying, selling or even just owning property,” he said.
While remortgaging remained steady, he warned the Budget’s chilling effect would be “reflected in the Bank’s next data release.”
“On the face of it, this Q3 data looks great – the strongest in five years – but it’s also likely to be a high water mark.”
Looking ahead, he said: “The market should start 2026 strongly. With the Bank of England all but certain to cut its base rate below 4% in time for Christmas, and another cut to 3.5% potentially coming in February, demand should bounce back.”
“Most lenders have priced these base rate cuts in already… competition between lenders is likely to become intense as they fight for a share of the recovering market.”
