The Alarming Rise of Mortgage Arrears in the UK

As the cost of living crisis continues to bite, a stark warning from the Bank of England has sent shockwaves through the UK’s mortgage market. The latest data reveals that more Britons are falling behind on their mortgage payments than at any other time in the last seven years.

The soaring cost of living crisis is leaving many struggling to cover basic expenses, let alone repay debts.

The Bank of England’s report for Q1 2024 paints a dire picture, with mortgage balances in arrears rising by 4.2 per cent compared to the previous quarter, totalling a staggering £21.3 billion. This represents a shocking 44.5 per cent increase from the same period last year.

Furthermore, the proportion of total loan balances in arrears relative to all outstanding balances also increased, rising from 1.23 per cent in the last quarter to 1.28 per cent. This is the highest level seen since Q4 2016.

“The lingering financial impact of the pandemic and soaring cost of living have left many struggling to cover basic expenses, let alone repay debts.”

However, there was some positive news in the report. The outstanding value of all residential mortgage loans fell by 0.1 per cent from the previous quarter, marking a 1.4 per cent decrease compared to a year ago. The total value of outstanding mortgages currently stands at £1,654.9 billion.

A borrower is considered to be in mortgage arrears when they miss their mortgage payments, which is recorded on their credit file.

Missing multiple payments can lead to property repossession, but help is available for those struggling to keep up with their debts. Money Saving Expert reassured the public that typically, repossession is only considered as a “last resort” by mortgage lenders, who would much rather “prefer you to repay”.

When a home is repossessed, usually lenders put it up for auction for a quick sale.

But if the winning bid doesn’t cover what’s left on the mortgage, borrowers might still be pursued by the lender to makeup the difference. Given this, MSE recommended homeowners to consider selling their property themselves if they have sufficient time as this can quite often secure a far better price.

Moreover, this could prevent a repossession from being registered against them, which could potentially impact their chances of securing future mortgages.

As the mortgage market continues to navigate these treacherous waters, one thing is clear: borrowers must take proactive steps to manage their debt and avoid falling into arrears. The consequences of inaction could be devastating.