FCA Q2 2026 Mortgage Lending Data Shows Rising High-LTV and High-LTI Advances

Key Takeaways

• The FCA's Q2 2026 mortgage lending statistics show gross advances up 31.7% year-on-year to £77.4 Billion, alongside a notable rise in high loan-to-value (90%+) and high loan-to-income lending.
• While arrears and possessions continued to decline, the growing share of higher-risk lending metrics warrants attention from compliance and risk teams at mortgage lenders.

Deep Dive

This quarterly release from the FCA and PRA provides a statistical snapshot rather than a new rulemaking, but the underlying trends carry meaningful implications for mortgage lenders' risk and compliance functions. The share of advances with loan-to-value ratios exceeding 90% rose to 8.4%, the highest since 2008 Q2, while advances with LTV above 75% hit a post-2007 high of 47.5%. Combined with a 0.9 percentage point increase in high loan-to-income lending (now 46.0% of advances), these figures indicate lenders are extending higher-risk credit profiles than in recent years, which could draw increased supervisory scrutiny under the FCA's responsible lending and affordability requirements (MCOB rules).

Compliance teams should note that despite the increase in higher-risk lending indicators, arrears and possessions metrics improved: outstanding balances with arrears fell 7.3% year-on-year to £19.7 Billion, and the arrears proportion held steady at 1.1%. This divergence between rising risk appetite (higher LTV/LTI) and currently benign asset quality suggests the FCA will likely continue monitoring closely for early signs of stress, particularly if interest rates or economic conditions shift. Firms should anticipate that sustained growth in high-LTV/LTI originations could prompt thematic reviews or enhanced reporting expectations.

No new deadlines or submission requirements are introduced in this report; the MLAR return process (quarterly, covering approximately 340 regulated firms) continues as business-as-usual. However, compliance teams should ensure MLAR submissions remain accurate and timely, as this data underpins FCA/PRA market-wide risk assessments. Firms with growing high-LTV or high-LTI books should proactively stress-test affordability assessments and ensure MCOB-compliant responsible lending documentation is robust, anticipating potential follow-up inquiries.

From a risk perspective, the data supports a moderate increase in prudential and conduct risk given more borrowers are entering with higher leverage relative to income and property value. Firms should reassess loan origination policies, ensure sufficient capital buffers against higher-risk tranches, and monitor remortgage activity (up 3.1 percentage points to 31.2%) as a potential indicator of borrowers seeking to manage affordability pressures. Overall, while no immediate regulatory action is required, this report should inform internal risk appetite reviews and board-level MI on mortgage portfolio composition.

Source: Financial Conduct Authority