Debts plague homeowners
50% annual jump in mortgage balances with arrears – Bank of England figures
The value of outstanding mortgage balances with arrears jumped by just over 50% in the fourthquarterof2023compared with a year earlier, according to Bank of England figures.
The Bank said the value of outstanding mortgage balances with arrears increased by 9.2% from the previous quarter, to reach £20.3 billion, which was 50.3% higher than in 2022.
The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.12% to 1.23%, marking the highest proportion recorded since the fourth quarter of 2016.
However, new cases of people falling behind with their house repayments decreased compared with the previous quarter, according to the Bank’s mortgage lenders and administrators statistics.
The value of new mortgage commitments (loans agreed to be handed out in the coming months) decreased by 6.6% from the previous quarter to £46.0 billion, and was 21.2% lower than a year earlier.
If the onset of the Covid-19 pandemic is excluded, this was the lowest level observed since thefirstquarterof2013,thebank said.
Karennoye,amortgageexpert at wealth manager Quilter, said thefigures“paintaveryworrying picture of the mortgage market”.
She said of the jump in arrears: “This shows that the large increase in mortgage rates seen over the last couple of years is really starting to bite for some borrowers and this is unfortunately causing them to fall into arrears as they simply can’t afford to keep up with their increased payments.”
Ms Noye added: “For those worried about falling into arrears,itisimportanttocontact yourlenderassoonaspossibleas there are options that can help ease the pain, such as going onto acheaperinterest-onlymortgage or setting up a payment plan.
“Discussing the problem and not burying your head in the sand is crucial though.”
She continued: “Elsewhere, the data points to a market in a deep freeze similarly suffering from the higher rates. While house prices have remained resilient, the value of new mortgage commitments decreased by 6.6% from the previous quarter to £46.0 billion, and was 21.2% lower than a year earlier.
“This illustrates a serious lack of demand and, although prices continue to be buoyant, if this dearth in demand continues prices may return to a downward trajectory.”
Simon Gammon, managing partneratknightfrankfinance, said: “At 1.23%, the proportion of loan balances in arrears is still very low, but the pace at which it is rising will be a source of concern for policymakers at the Bank of England.
“The housing market has shown remarkable resilience given the surge in borrowing costs that we’ve seen. Much of thatisdowntoforbearancefrom lenders, which has kept forced selling very low.
“While borrowing costs have likely peaked and should begin falling meaningfully over the summer, the figures demonstrate that we’re not yet out of the woods and conditions remain very difficult for many borrowers.
“Anybody concerned about not meeting their payments should contact their lender at the earliest opportunity. They can offer solutions like switching to interest only payments, or extending the term of a mortgage, to help borrowers through a difficult period.”