Mortgage market slowing down, according to Bank of England  

BoE said this marks a return to pre-Covid levels, as the value fell by two percent on a quarterly basis.

Its figures also highlight that the value of gross mortgage advances during Q4 2021 equate to £70.2bn. This is 8.4% lower than Q4 2020, and the lowest level seen since Q3 2020.

BoE’s report further shows that the share of gross mortgage advances with an interest rate less than two percent above the bank rate came to 71.3% - 6.5% higher than in Q4 2020.

It says the increase was fuelled by the 15 basis point increase in the bank rate, which took effect in December 2021, rather than by remarkable changes in mortgage rates.

The report highlights movements in arrears too. Between Q3 2021 and Q4 2021, the value of outstanding balances in arrears dropped by 2.1% to £15.3bn. This is the lowest level seen since the record began in 2007, BoE says.

Andrew Montlake, managing director of mortgage broker Coreco, pointed out that the drop in arrears levels is: “A result of the fact interest rates have been at rock bottom for so long and the jobs market has remained pretty robust”.

He therefore warned that arrears may rise “as the BoE raises interest rates to contain inflation”.

Gareth Lewis, commercial director of lender MT Finance, noted that the “frenetic pace of activity over the previous 18 months” was unsustainable.

He welcomed “a more reasonable pace, similar to pre-pandemic levels”.

“It will be interesting to see what happens over the coming couple of months with regard to purchase transactions,” he said.

“We are likely to see a further increase in base rate and with the bigger lenders starting to raise their mortgage rates, borrowing costs are set to edge up across the board”.