Britain’s newest mortgage lending is carrying more exposure to property values, even as distress in the existing loan book recedes. Mortgages above 90% loan-to-value accounted for 8.4% of gross advances in the second quarter of 2026, their highest share since the second quarter of 2008. Yet outstanding balances in arrears fell to £19.7 billion, 7.3% lower than a year earlier.
Those facts are not contradictory. The first measures the flow of loans completed during one quarter. The second measures trouble across a stock of mortgages written over many years. Reading either as a verdict on the whole market obscures the more useful question: are lenders extending access while pricing and controlling the added risk?
More lending is entering at higher LTVs
The move is broader than the narrowest deposit band. Advances above 75% LTV reached 47.5% of the quarter’s total, the highest share since the fourth quarter of 2007. Loans above 95% LTV remained just 0.5% of advances. Most of the change therefore sits below that extreme edge, including borrowers bringing deposits of roughly 5% to 25%.
The above-90% share was 0.4 percentage points higher than in the previous quarter and 1.4 points higher than a year earlier. Because it is a share of advances, it can rise through faster growth in high-LTV completions, slower activity in lower bands, or both. The aggregate tables do not publish application or rejection rates that would separate those routes.
LTV is an exposure measure, not a probability of default. A higher ratio leaves the borrower with less equity and gives the lender a smaller cushion if house prices fall and a possession ends in a sale. It does not reveal the applicant’s credit record, income stability, affordability buffer or payment behaviour.
The volume backdrop also needs care. Gross advances rose to £77.4 billion, up 11.1% from the previous quarter and 31.7% from a year earlier. New commitments, lending agreed for coming months, were £79.2 billion, only 1.4% higher over the quarter and 1.3% higher over the year. Advances and commitments refer to different stages of the pipeline, so the gap between them is not evidence that completed lending will rise or fall next quarter. The FCA also labels the series as not seasonally adjusted.
Borrower mix does not settle the explanation
A first-time-buyer surge would be an intuitive explanation for more high-LTV lending, but the aggregate mix does not show one. First-time-buyer advances were 27.3% of gross lending, 0.1 percentage points lower than both the previous quarter and a year earlier. Home movers accounted for 28.8%, down 1.5 points over the quarter but 0.1 points higher over the year. Owner-occupier remortgages, meanwhile, rose to 31.2% of advances, 2.2 points higher than a year earlier.
Income multiples provide a second signal. The share of lending that the FCA classifies as high loan-to-income reached 46.0%, up 4.6 percentage points over the year. In this release, that means at least four times income for a single applicant or at least three times joint income. It is not proof that affordability checks weakened, but it makes the higher-LTV move harder to dismiss as property-price arithmetic alone.
The purpose and borrower shares are reported separately from the LTV distribution. A flat first-time-buyer share across all lending therefore cannot rule out a shift towards smaller deposits within that group. Nor can it show whether remortgagers released more equity. The release identifies a composition question but does not resolve it.
The public MLAR tables cannot identify which lender wrote each loan or tag advances supported by a government guarantee. The permanent Mortgage Guarantee Scheme has been available since July 2025 to sustain 91% to 95% LTV mortgages for eligible first-time buyers and home movers, with the Treasury absorbing part of a participating lender’s potential loss. That may support product availability, but the aggregate FCA release cannot show how much of the latest rise it explains.
The back book is getting cleaner, within a threshold
The arrears measure is narrower than a count of everyone who has missed a payment. MLAR records arrears only when overdue amounts reach at least 1.5% of the borrower’s current loan balance. Forbearance for borrowers who are not yet in arrears, or remain below that threshold, may not appear.
Within that definition, balances in arrears represented 1.1% of all outstanding mortgage balances, unchanged over the quarter and 0.1 percentage points lower than a year earlier. Of the £19.7 billion total, £4.2 billion was non-regulated lending, including buy-to-let and other residential loans where the property is not used by the borrower or qualifying dependants. That non-regulated amount fell 12.7% over the year.
New possessions also declined to 2,058 in the quarter, 15.6% fewer than a year earlier. The stock of possessions fell over the quarter but remained 1.7% higher than a year earlier at 8,825, a reminder that improvement is not uniform across every measure.
None of this tells us how the mortgages completed this spring will perform. They have barely begun to season, while today’s arrears reflect older borrowing decisions, later refinancing conditions and household income shocks.
The test moves from access to performance
For lenders and supervisors, the next evidence should be more granular: the concentration of high-LTV advances by lender, the use of guarantees, pricing by risk band, stressed affordability results and the later payment performance of the 2026 cohort. Without that link, the MLAR release can show that higher-LTV and higher-income-multiple shares rose, but not why they rose or whether the same borrowers account for both movements.
For borrowers, the immediate trade-off is simpler. A small deposit can bring home ownership within reach, but it also reduces protection against a fall in the property’s value and can narrow refinancing options. Falling arrears in the old book are welcome. They are not a promise about the new one.
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