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Mortgage Lenders and Administrators Statistics: 2016 Q4 Summary

Core Content Overview

The document provides an analysis of mortgage lending activities in the UK during the fourth quarter of 2016, focusing on residential loans to individuals. It includes data on new loan advances, new commitments, outstanding loan balances, and the distribution of loan margins and purposes.

Key Statistics

• New Residential Loans (Gross Advances):
  £62.8 billion of new residential loans were advanced during October-December 2016.

  • This represents a 2.6% decrease compared to the previous quarter (Q3 2016).
  • A 0.4% decrease compared to the past four quarters.

• Outstanding Residential Loan Balances:
  At the end of 2016, the total value of all outstanding residential loans was £1,337.8 billion, showing a 0.5% increase from Q3 2016.

• New Commitments:
  New commitments increased by 1.2% quarter-on-quarter from £61.0 billion in Q3 2016 to £61.8 billion in Q4 2016.

Distribution of Margins

• The distribution of margins paid by customers over the Bank Base Rate (BBR) on new borrowing returned close to the pattern seen in Q1 2016.
• 55% of new advances were at less than BBR + 2%.
• 13% of new loans were at BBR + 3% or higher.
• In contrast, 31% of outstanding mortgages still paid interest at BBR + 3% or higher.

Loan-to-Value (LTV) Distribution

• There has been little movement in the distribution of gross advances across the MLAR's LTV brackets (Chart 4).
• This suggests a stable lending pattern in terms of risk exposure.

Product Split by Purpose

• The product split of gross advances has remained largely unchanged since Q2 2016.
• Buy-to-Let (BTL) lending saw a temporary increase in Q1 2016, likely due to the anticipation of additional stamp duty on completed BTL transactions starting on 1st April.
• Since Q1, the share of BTL lending has stabilised at a lower level, accounting for 13.9% of residential home loans transactions in Q4.
• The share of BTL in the total balance remained at 15.6% (Chart 6).

First Time Buyers

• The share of First Time Buyers in new mortgage advances reached 22.0%, the highest level since the time series began in 2007.
• This increase coincides with a rise in high LTV lending, though it remains significantly lower than pre-crisis levels.

Arrears

• Chart 7 illustrates the proportion of arrears balances to total loan balances, though no specific percentage is provided in the text.
• This suggests that while the overall lending activity remained stable, there may still be concerns regarding borrower performance and default risk.

Summary of Trends

• Mortgage lending activity in Q4 2016 showed a slight decline in new advances but a modest increase in outstanding balances.
• Margins on new borrowing continued to narrow, with a majority of loans offered at lower rates relative to the Bank Base Rate.
• The product mix remained stable, with a notable but temporary increase in BTL lending in Q1 2016.
• First Time Buyers accounted for a record high share of new mortgage advances, indicating a shift in market dynamics.
• The distribution of LTV ratios and arrears balances suggest a continued focus on risk management and a relatively stable lending environment.