Recent data has revealed that an alarming number of homeowners are facing the threat of repossession in the UK. In the first quarter of 2024 alone, there were 870 mortgaged homes repossessed due to the ongoing cost of living crisis. A staggering 32,000 properties are currently at risk, indicating a significant upturn in financial distress among homeowners.

The research, provided by UK Finance, highlights a 36% increase in the number of properties being repossessed compared to the previous year. This surge is attributed to the considerable rise in mortgage rates which have jumped by an average of £457 per month. This increase comes at a time when UK wages have remained relatively static, squeezing household budgets even further.

Deepening Debt Issues

The situation is exacerbated by the number of homeowners falling behind on their mortgage payments. As of the latest data, 96,580 homeowner mortgages were in arrears, amounting to 2.5% or more of the outstanding balance—a 3% increase from the previous quarter. More concerning is the subset of these mortgages; 32,470 have fallen into severe arrears, with debts exceeding 10% of the mortgage balance, marking a 6% rise from the last quarter.

Drivers Behind the Distress

Experts have pointed to the cost-of-living crisis and rising household bills as primary contributors to this troubling trend. However, significant rate hikes by the Bank of England have also played a crucial role. To combat high inflation, the central bank has increased the base rate from a mere 0.1% in late 2021 to a substantial 5.25% recently. This policy shift has directly impacted mortgage rates, which have soared over the past couple of years.

For instance, data from online mortgage advisors Mojo Mortgages shows that the average mortgage rate for re-mortgaging stood at just 1.78% in April 2022. By April 2024, this rate had escalated to 5.33%. For a homeowner with a £250,000 mortgage spread over 20 years, monthly payments surged from £1,238 to £1,695—an increase that translates to an additional £5,484 annually and £10,968 over a two-year fixed-rate term.

The Real Cost to Homeowners

This spike in mortgage costs, combined with broader economic pressures, has left many borrowers in a precarious position. According to Mojo Mortgages, the increasing financial burden is pushing a significant number of homeowners towards the brink of losing their homes.