- 99,480 mortgages are in arrears – a 24% increase on a year ago…
- …and a 9% increase on the previous quarter
- Around 1.6 million mortgage deals are due to end in 2024 – leading to more cost pressures
Laura Suter, director of personal finance at AJ Bell, comments on the latest UK Finance Household Finance figures:
“Mortgage arrears jumped in the third quarter of this year, as more people saw their fixed rate deal end and remortgaged onto dramatically higher rates – meaning they fell behind on repayments. Many homeowners have so far been unaffected by higher interest rates, as they have been comfortably sat on a lower fixed rate deal. But as more people come to remortgage, they face the reality of higher rates that are unaffordable for many.
“In the third quarter of this year there was a 9% leap in the number of homeowners who had fallen into arrears. But if we compare the figure to a year ago there has been a 24% increase in the number of homeowners in arrears – with just shy of 100,000 mortgages now behind on payments. UK Finance points to the fact that many of these mortgages are older products that weren’t subject to the more stringent affordability tests, while a number are also interest-only products.
“These figures also only classify homeowners as being officially in arrears if they owe more than 2.5% of the mortgage value in arrears – for a £400,000 mortgage that would mean they were £10,000 behind on their payments. If we look at the underbelly of homeowners who are between 1.5% and 2.5% in arrears we can see there is a huge number of people who are likely to officially fall into arrears in the current quarter.
“Some homeowners might take comfort from the fact the Bank of England appears to have halted its rate hiking cycle and that mortgage rates have subsequently dropped slightly. But there is still a huge gulf between current mortgage rates and the far lower fixed-rates that many homeowners will be coming off. We know that around 1.6 million mortgage deals are due to end in 2024 and until we see meaningful cuts from the Bank of England those homeowners will still be paying hundreds, and in many cases thousands, more each year for their mortgage.
“The current Mortgage Charter is preventing these arrears numbers from rising more dramatically. The agreement means that those struggling to pay their mortgage can switch to an interest-only product, make part-payments or extend their term in order to make their monthly payments more manageable. However, these are all temporary measures and, as we’re not expecting interest rates to fall any time soon, at some point these homeowners will have to face the reality of higher rates – and many will fall into arrears.
“Anyone who is struggling to pay their mortgage or thinks they will struggle in the near future should approach their lender as soon as possible. You can get help and guidance on your options without it impacting your credit file.”
