The value of new mortgage commitments, which involves lending agreed to be advanced in the coming months, was 53.2% lower in Q2 2020 than the previous year, at £34.3bn, according to the latest figures from the Bank of England.

The Mortgage Lenders and Administrators Return (MLAR) statistics for Q2 found that the value of gross mortgage advances was £44.1bn which is a third lower than in 2019.

The outstanding value of all residential mortgages loans was £1,513.3bn at the end of Q2 2020, which is a yearly increase of 3.2%.

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The share of mortgages advanced in Q2 with LTV ratios exceeding 90% being 4.9% which is 0.6 percentage points lower than in 2019.

In addition, the share of gross mortgage lending for buy-to-let purposes was 14.4% which is an increase of 1.2 percentage points from 2019.

The value of outstanding balances with some arrears increased by 2.8% over the quarter to £14.1bn and now accounts for 0.93% of outstanding mortgage balances.

Jonathan Harris, managing director of Forensic Property Finance, said: ‘The impact of the pandemic comes through loud and clear in these figures from the Bank of England with the value of new mortgage commitments dropping dramatically in the second quarter.

“These were 53.2% lower than the same period the previous year, which was during the Brexit debacle so the market was not particularly strong as uncertainty meant people put decisions to buy on hold.

“This year, the market was in the midst of lockdown with very few transactions able to take place.

“The market should bounce back in the third quarter in response to the mini boom in the housing market.

“The vast majority of lending remained at 75% loan-to-value (LTV) or less, a feature of the market for the past few quarters.

“High LTV deals of 90 per cent and more are increasingly difficult to come by and this is likely to continue for the foreseeable future until more lenders commit to this segment of the market.”

Rob Barnard, director of intermediaries at Masthaven, added: “The second quarter of the year saw a dramatic downturn in lending activities as a result of the COVID-19 pandemic, subsequent lockdown and closure of the housing market.

“The good news, however, is that the mortgage market is already showing the green shoots of recovery.

“Government initiatives such as the stamp duty holiday and extension of the Help to Buy equity loan scheme certainly helped to bolster demand amongst potential borrowers, and brokers also seem to be optimistic about the sector’s recovery.

“In fact, 71% of intermediaries said they feel confident about the market’s longer-term prospects, according to our recent broker survey.

“The mortgage and short-term lending sectors have proven to be remarkably resilient over the past few months, adapting the new circumstances and ensuring they remain open for business.

“The release of pent-up demand post-lockdown should help to bring activity levels back on track over the coming months, with a surge in non-traditional borrowers giving brokers new opportunities to work with specialist lenders to serve this expanding market.”