According to recent data from the Bank of England, late mortgage payments saw a significant increase of 9.2% in the last quarter of 2023 and have risen by 50% from the previous year. These statistics highlight the increasing strain in the UK’s mortgage market.
Increased interest rates combined with a growing percentage of individuals leaving the workforce in recent months have caused financial strain on disposable incomes at home. As a result, some families have been forced to reduce or temporarily stop paying various monthly expenses, such as their mortgage.
The Bank announced an increase in the total amount of outstanding mortgage balances with arrears, reaching £20.3 billion or 1.23%, the highest since the fourth quarter of 2016.
The calculation for mortgage arrears looks at the percentage of borrowers who haven’t paid at least 1.5% of their remaining mortgage balance, or whose property has been taken back by the lender.
The managing partner of Knight Frank Finance, Simon Gammon, expressed concern for policymakers at the Bank of England as the percentage of loans in arrears has increased at a steady rate to 1.23%, which is still comparatively low.
He stated that despite the increase in borrowing costs, the housing market has displayed impressive durability. This can be attributed to leniency from lenders, resulting in a minimal amount of forced selling.
Gammon stated that although borrowing expenses have probably reached their highest point and will soon start to decrease significantly during the summer, the data shows that we are still facing challenges and that the situation continues to be tough for numerous borrowers.
Over 1.5 million households are predicted to refinance their loans in the current year with increased mortgage rates, adding extra burden on lenders to authorize payment breaks.
Yet, due to lenders showing restraint and implementing strict borrowing regulations in the past ten years, there is less possibility for a sudden increase in repossessions, as only households who can handle higher borrowing expenses have been able to obtain loans.
According to the trend of older households owning their homes completely, the Bank reported that the total value of residential mortgage loans decreased by 0.1% from the previous quarter to £1,657.6bn. This marks a 1.1% decrease from the previous year.
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The decrease in mortgage loans contributed to the overall value of the UK mortgage market, as there was a 13.4% decrease from the previous quarter to £54 billion, and a 33.8% drop from the previous year.
The amount of newly agreed mortgage loans to be advanced in the future decreased by 6.6% from the last quarter to a total of £46bn. This is 21.2% lower than the amount from a year ago.
Excluding the beginning of the Covid-19 pandemic, the Bank stated that this was the lowest recorded since the first quarter of 2013.
Source: theguardian.com
