There has been a large increase in mortgage arrears, according to Bank of England data which highlights the level to which borrowers are falling behind with repayments.
Soaring mortgage rates over the last two years, combined with the rising cost of living, have left many homeowners in financial difficulty.
And the statistics out today illustrate the extent of this. It shows the value of outstanding mortgage balances with arrears is more than 50% higher than it was a year ago. In the last three months of 2023 it increased by 9.2%.
Whilst the number of new arrears cases has fallen a little – by 2.6% – mortgage experts are still concerned about today’s data from the Bank of England.
Karen Noye, mortgage expert at Quilter, said it showed the large increase in mortgage rates seen over the last couple of years was ‘really starting to bite for some borrowers’.
She added: “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.”
Other experts wondered if these statistics may nudge the Bank of England’s decision makers, the Monetary Policy Committee, to reduce interest rates sooner than expected.
Michelle Lawson, director at Lawson Financial, speaking via the Newspage agency, said: “This data makes for grim reading but is sadly not unexpected. People don’t have bottomless pockets and this data places stark emphasis on that fact.
“Household finances are set to spontaneously combust if the current level of pressure on them continues. You’d like to think the Monetary Policy Committee will read this report given that the Bank of England produced it.”
What to do if you are falling behind with your mortgage payments
If you are concerned about being able to make repayments – whether you have already fallen behind or fear you may do in the near future – speak to your lender.
Although this might seem intimidating, most lenders have signed a pledge which means they are obliged to offer you alternative payments solutions if you have run into difficulties.
Robert Timm, managing director at Sunland Mortgages, speaking via Newspage, said: “If anyone is struggling, they should engage with their current lender, who will hopefully have signed up to the Mortgage Charter, and have options available to help in the short term.
“I myself have had three clients come to me who have been able to use these options for a short term fix, and it helped them massively. Borrowers shouldn’t suffer in silence.
Noye echoed his advice: “For those worried about falling into arrears, it is important to contact your lender as soon as possible as there are options that can help ease the pain such as going onto a cheaper interest only mortgage or setting up a payment plan.
“Discussing the problem and not burying your head in the sand is crucial though.”
