Latest mortgage lending data from the Bank of England and FCA shows that the value of outstanding mortgage balances with arrears is 18% higher than a year earlier and has risen to £21.9 billion, albeit this has declined by 0.4% compared to the previous quarter.

New mortgage arrears cases (as a proportion of total outstanding balances with arrears) decreased by 1.3 percentage points from the previous quarter to 9.7%, and is 6.3 percentage points lower than a year earlier

The data also found that the outstanding value of all residential mortgage loans increased by 0.6% from the previous quarter to £1,670.9 billion, the highest stock of outstanding mortgage loans since 2023 Q1, and was 0.8% higher than a year earlier.

The data showed that the value of gross mortgage advances increased by 8.9% from the previous quarter to £65.5 billion, the highest new advances since 2022 Q4, and was 6.7% higher than a year earlier.

However, the value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 1.3% from the previous quarter to £66bn but remained 34.2% higher than a year earlier.

Commenting the data Tom Cuppello, Director, Risk, at Broadstone, said “The impacts of the significant increases to mortgage rates over the past couple of years is reflected in a notable rise to the value of mortgage balances with arrears. This is now slowing and new arrears cases are also falling as households adjust to the new rate environment but there remains further pain to come.

“The Bank of England forecasts that around 4.4 million mortgages are expected to see payments rise by 2027, including some 420,000 households that are bracing for £500-per-month hikes. While household financial resilience has stabilised since the worst of the cost-of-living crisis, it is clear that there are still strong headwinds with the base rate expected to remain unchanged at 4.75% at next week’s Bank of England meeting.

“The macroeconomic environment remains uncertain and volatile so there can be no let up from lenders in the support they offer to their customers. As we head into a difficult period of the year for personal finances, it is evident that lenders need to remain proactive in supporting the long-term financial interests of their customers.”

Source:  Credit Connect