Mortgage arrears rise amid high interest rates

Mortgage rates

Outstanding mortgage balances with arrears rose by 9.2% between October and December compared to the previous quarter, reaching £20.3 billion

The percentage of UK mortgages in arrears has reached its highest point since 2016 due to the ongoing struggle of households with high interest rates.

Outstanding mortgage balances with arrears rose by 9.2% between October and December compared to the previous quarter, reaching £20.3 billion. This amount was 50.3% higher than the same period a year ago, according to Bank of England data.

The data from approximately 340 regulated mortgage lenders indicated that the proportion of total loan balances with arrears, in relation to all outstanding mortgage balances, increased from 1.12% to 1.23% in the quarter, marking the highest level since 2016.

Karen Noye, mortgage expert at Quilter, said: 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 cannot afford to keep up with their increased payments.

The changes to national insurance and child benefit at the budget last week, will barely help considering many people will have seen their mortgage payments shoot up by £300 or more a month, Noye added.

New mortgage commitments decreased by 6.6% from the previous quarter to £46 billion, showing a 21.2% decline compared to the previous year.

Furthermore, the data showed that the percentage of mortgage advances for BTL purposes dropped by 0.5% from the previous quarter to 7%, the lowest level since mid-2010.

Positively, the statistics show that new arrears cases dropped by 2.6% from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2% higher than a year earlier. This may well continue to jump again though as more people come off fixed term mortgages set when rates were low, Noye added.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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