The proportion of mortgages falling into arrears reaching its highest point in six years. According to the Bank of England’s latest report, the proportion of mortgage balances in arrears has increased alarmingly. In the third quarter of this year, this figure rose from 1.02% to 1.14%. This is the highest level witnessed since the second quarter of 2017, signaling a worrying trend for homeowners and the mortgage market.
Digging into the details, the value of outstanding mortgage balances with arrears saw an 11.4% increase from the previous quarter, amounting to £18.8 billion. This figure is a staggering 44% higher than it was a year ago, based on the Mortgage Lenders and Administrators statistics.
New Mortgage Commitments Decline
In a parallel development, the value of new mortgage commitments – essentially lending that’s agreed to be advanced in the coming months – has also taken a hit. There’s been a 16.5% decrease from the previous quarter, bringing the total down to £51.5 billion. This is 41.4% lower than the levels seen a year earlier.
Expert Insights
Sarah Coles, the head of personal finance at Hargreaves Lansdown, has expressed concern over these developments. She notes that total mortgage arrears have risen over 10% in a quarter and nearly 50% in a year. The proportion of total mortgage lending in arrears hasn’t been this high since mid-2017.
The Prolonged Squeeze
Coles warns that the financial strain caused by higher rates is not going to be a short-term issue. Many are moving from fixed rates of less than 2% to around 6%, leading to significant financial challenges.
Advice for Struggling Homeowners
For those struggling with mortgage payments, Coles emphasises the importance of facing the problem head-on. Mortgage companies are obligated to offer assistance, which can include a range of solutions such as payment holidays, extending the mortgage term, or temporarily switching to an interest-only deal. Reaching out for help can provide much-needed relief and options for those feeling cornered by their financial situation.