The value of outstanding mortgage balances with arrears has reached £21.9bn, its highest since 2014 Q2 and 32 per cent higher than last year.
According to the latest mortgage lending data from the Bank of England and FCA, on a quarterly basis, the value of outstanding mortgage balances with arrears increased by 2.9 per cent compared to Q1 while the proportion of the total loan balances with arrears increased on the quarter from 1.29 per cent to 1.32 per cent, the highest since 2016 Q2.
Meanwhile, new arrears cases decreased by 0.5pp from the previous quarter to 11.0 per cent of the total outstanding balances with arrears and was 5.3pp lower than a year earlier.
Additionally, the value of new mortgage commitments increased by 11.3 per cent to £66.9bn from the previous quarter and was 12.5 per cent greater than a year earlier. The ratio of lending to borrowers with a high loan-to-income (LTI) increased by 2.7pp to 42.5 per cent from the previous quarter but remained 1.2pp lower than a year earlier.
Broadstone director Tom Cuppello says: “The impacts of the significant increases to mortgage rates continue to reverberate around the secured lending market. As more borrowers came off cheap fixed rates over the past couple of years and faced a significant increase in their mortgage payments, it was inevitable that we would see a rise in arrears flowing through the system.
“Nearly two years on from the ill-fated Mini Budget, we are likely to be nearing the tail end of homeowners facing these issues, especially given the length of time to prepare and the recent decline in rates. This is evidenced in the slowdown in arrears volumes and falling numbers of new arrears cases.
“Yet there is no room for complacency among lenders who must continue to ensure they are supporting the long-term financial interests of their customers, especially as the economic and fiscal environment remains volatile. The Government’s Mortgage Charter, the advent of Consumer Duty and additional FCA rules demonstrate that the legislative direction of travel is towards protecting borrowers in uncertain economic times.”