The outstanding value of all residential mortgage loans was £1.6bn at the end of 2021 Q3, 4.9% higher than a year earlier, according to the Bank of England’s (BoE) Mortgage Lenders and Administrators Statistics for Q3.

The value of gross mortgage advances in 2021 Q3 was £73.4bn, which was £15.6bn lower than the previous quarter, but 17.4% higher than the amount seen in 2020 Q3.

Meanwhile, the value of new mortgage commitments was 8.2% less than the previous quarter, but broadly unchanged from a year earlier, at £78.9bn.

The share of gross advances with interest rates less than 2% above Bank Rate was 57.3% in 2021 Q3, 16.9 percentage points (pp) lower than a year ago.

The share of mortgages advanced in Q3 2021, with loan-to-value (LTV) ratios exceeding 90% was 4.2%, 0.6pp higher than a year earlier and a 2.1pp increase compared to the previous quarter.

Looking to the share of purchases for owner-occupation, this was 58.9%, down 7.6pp on the previous quarter but up 3.1pp from 2020 Q3.

The share of gross advances for remortgages for owner-occupation was 22.9%, a decrease of 2.1pp since 2020 Q3, but an increase of 6.4pp since 2021 Q2.

The value of outstanding balances with some arrears decreased by 3.4% over the quarter, to £13.8bn, and now accounts for 0.86% of outstanding mortgage balances.

Turning to the BoE’s Financial Stability report, the Financial Policy Committee (FPC) has increased the UK Countercyclical Capital Buffer (CCyB) rate to 1%, to be implemented by 13 December 2022.

Provided the economy continues to recover, the FPC said it expects to increase the CCyB to 2% in 2022 Q2, to take effect in 2023 Q2.

This decision reflected the fact that risks have returned to their pre-COVID level, while Major UK banks already have sufficient capital to meet this increase.

Karen Noye, mortgage expert at Quilter, said: “The property market has been incredibly hot in 2021 but the latest set of mortgage statistics from the Bank of England show that the temperature is finally reducing as the value of gross mortgage advances in Q3 is £15.6bn lower than Q2.

“However, this still is an eyewatering 17% higher than last year. Similarly, the value of new mortgage commitments (lending agreed to be advanced in the coming months) was 8.2% less than the previous quarter illustrating that some sense of normality is returning to the market.

“While this should mean that house prices start to decrease, news yesterday from the Bank of England might mean house prices soar even higher.

“The Bank of England confirmed that they were going to consult on whether the time is right to withdraw its affordability rules which dictate how lenders assess whether borrowers could continue to afford their mortgage if their mortgage interest rate increased to 3% above their Standard Variable Rate.

“The thinking is that this would help first time buyers who are stopped from getting on the housing ladder by significant house price increases due to the stamp duty holiday, the race for space and a proliferation of cheap mortgage deals.

“While this would help first time buyers borrow more it may not go to the root of the problem which is to do with wage growth failing to keep up with ever increasing house prices.

“First-time buyers are simply struggling to raise a big enough deposit to get on the housing ladder as the cost-of-living skyrockets due to inflation.

“These affordability rules were brought in after the financial crash and any changes to these rules should be very carefully consulted on to avoid a potential repeat of the catastrophic problems that we saw more than a decade ago.

“Let’s not forget these rules are in place to prevent borrowers potentially getting into financial difficulties and to guard against banks sustaining subsequent loan losses.

“Ultimately, changing these rules could result in a unsustainable housing bubble forming with prices rising even higher than they are currently.

“If the property market was to then crash it could lead to many people being left with negative equity, which can be a disastrous position to be in particularly early on in life.

“Being in negative equity would mean that if someone wants to sell their home, they will need to cover all the negative equity to redeem their existing mortgage, pay moving costs and save for an additional deposit for the new purchase.

“For many people this is too much of a financial burden, which leaves them trapped in their home with no means of moving until prices increase again.”