There was almost £1.4tn of mortgage debt outstanding at the end of September, up 4.1% at the same time a year ago. Photograph: Mat
British households are taking on the highest levels of fresh mortgage debt since the beginning of 2008, spurred by low interest rates from the Bank of England, even as the proportion of first-time buyers dwindles.
Banks extended new mortgage commitments to borrowers worth £69.6bn in the three months to the end of September, an increase of 14% on the same period in 2016 and the highest amount recorded over a three-month period since the start of 2008, official figures from Threadneedle Street show.
The boom is being driven by people remortgaging their homes in order to lock in cheap deals before the Bank raised the cost of borrowing in November for the first time in a decade. There was almost £1.4tn of mortgage debt outstanding at the end of September, up 4.1% on the same point a year ago.
Government ministers are likely to be embarrassed by the lending figures, which show the proportion of mortgages extended to first-time buyers fell over the period, despite their efforts to encourage more young people to get on the housing ladder with help-to-buy loan support. The share of new lending to first-time buyers fell by 1% to stand at 21% of the overall market.
Philip Hammond was subjected to sharp criticism following the budget last month when analysis from the independent Office for Budget Responsibility showed steps to scrap stamp duty for most first-time buyers would push up house prices and only help 3,500 people buy a home.
There was positive news for ministers seeking to curb the buy-to-let lending market after a boom in recent years, with the number of mortgages extended to landlords at its lowest level for four years.
The figures also shine a light on cutthroat lending practices among banks, driven to offering more competitive rates by more lenders entering the market. Several small banks such as Aldermore and Atom Bank have started selling mortgages in recent years, while major banks such as RBS have also begun focusing more on home loans, viewing them as safer ways to make money than riskier investment banking.
The Bank said the proportion of new loans extended at less than 2% above its base rate – which rose from 0.25% to 0.5% last month – now accounts for 65.1% of fresh loans sold to consumers, after a steady increase over the past year.
The low interest rates are helping consumers keep up with their monthly payments, with the proportion of loans in arrears at the lowest level since at least the beginning of 2007.