Mortgage Warning: The Alarming Rise in Arrears

As the Bank of England’s latest report reveals, a worrying trend has emerged: more homeowners are struggling to make their mortgage payments. The data shows a significant rise in arrears, with mortgage balances increasing by 4.2% compared to the previous quarter, and a staggering 44.5% increase from a year earlier.

Mortgage arrears on the rise

The report highlights the devastating consequences of the pandemic and the staggering cost of living rises, leaving many homeowners struggling to make ends meet. The proportion of total loan balances with arrears relative to all outstanding balances has increased from 1.23% to 1.28%, the highest level since the final quarter of 2016.

On a more optimistic note, the report also reveals that the outstanding value of all residential mortgage loans decreased by 0.1% from the previous quarter, falling 1.4% compared to a year ago.

The Consequences of Falling Behind

A borrower falls into mortgage arrears when they miss their mortgage payments, which is also recorded on their credit file. Missing multiple payments can result in the property being repossessed, but there is help available for those struggling to stay ahead of their debts.

The consequences of falling behind

Money Saving Expert reassures Brits that mortgage lenders typically view repossession as a “last resort”, and would much rather see borrowers repay their debts. It’s worth noting that major lenders won’t repossess a home until at least 12 months after the first missed payment, and only if the borrower shows no signs of addressing their financial difficulties.

When a home is repossessed, lenders usually put the property up for auction to secure a quick sale. However, if the auction price doesn’t cover the outstanding mortgage, borrowers may still be pursued by the lender to recover the remaining debt.

For this reason, Money Saving Expert advises homeowners to consider selling the property themselves if time allows, as this could potentially fetch a higher price. This approach also prevents a repossession being registered against the borrower, which could impact their ability to secure future mortgages.

Selling your home to avoid repossession

The Importance of Seeking Help

As the mortgage arrears continue to rise, it’s essential for homeowners to seek help if they’re struggling to make their payments. With the right guidance and support, borrowers can avoid the devastating consequences of repossession and get back on track with their finances.

Seeking help when struggling with mortgage payments