The latest figures from Pepper Advantage, a global credit intelligence firm, reveal that the growth rate of mortgage arrears in the UK has decelerated, hitting its lowest quarterly rise since the economic tremors caused by the Mini-Budget in September 2022. In the first quarter of 2024, the arrears growth rate dipped to 3.9%, a significant decrease from the 5.7% witnessed in the last quarter of 2023.

This slowdown in the escalation of mortgage arrears is a breath of fresh air for many, suggesting a subtle stabilisation in some households’ financial health. This observation marks the slowest growth in arrears since the latter quarter of 2022, a period when households first began feeling the pinch from rising living costs coupled with the Mini-Budget’s impact.

Despite this positive trend, it’s crucial to note that the absolute level of arrears remains worryingly high, the highest since the 2008 financial crisis, underscoring ongoing struggles for many homeowners.

Regional and Demographic Disparities

The report shows geographical and age-related disparities in mortgage health:

• Regional Variations: The North East and North West of England are exceptions to the national trend, with arrears rates in these areas still on the rise. In contrast, the West Midlands and East Anglia saw low increases in arrears rates, at just 0.4% and 0.5% respectively.
• Age Influences: Older homeowners, particularly those aged 60 and above, are facing the highest levels of arrears. Interestingly, every age group recorded a slowdown in arrears growth during Q1 2024, with the 31-40 age bracket showing almost negligible growth.

Economic Factors at Play

The easing of arrears growth rates could be attributed to a combination of stabilising inflation rates and healthier wage growth, providing some respite for household budgets. Additionally, the report highlighted a decrease in the percentage of direct debit rejections, a common issue following the holiday spending season, which fell by 2.3% in the first quarter compared to the end of 2023.

Aaron Milburn, the UK managing director of Pepper Advantage, commented on the findings, expressing cautious optimism. He noted that the slowed growth in arrears and the reduction in payment rejections are encouraging signs. However, he also emphasised the complexity of the current situation, with the overall level of arrears still echoing the heights seen during the 2008 crisis.

Milburn pointed out that while some regions and demographic groups are seeing improvements, others continue to struggle, highlighting the uneven spread of financial recovery across the country. The data presents hopeful indicators, yet it’s premature to declare a definitive turn in the tide. Ongoing support for vulnerable groups remains essential as the economic landscape continues to evolve.