- Arrears are expected to jump 70% between the end of 2022 and the end of 2025, according to figures from UK Finance (under embargo – access code required)
- Mortgage lending to drop 5% in 2024
- Possessions to increase by 16% in 2024
Laura Suter, director of personal finance at AJ Bell, comments on the latest UK Finance mortgage market predictions:
“The outlook for the housing market is pretty bleak for next year: subdued transactions, lower lending and a large jump in arrears as people struggle to repay their debts. There isn’t much optimism that things will dramatically improve in 2025, even as interest rates hopefully start to drop, with arrears still climbing as people face the reality of a higher interest rate environment.
“The fact remains that higher interest rates will cause pain for homeowners for years to come. Even if the Bank of England does start cutting rates next year, or early 2025, they are going to drop gradually, meaning they will take a long time to return to more reasonable levels. At the same time, homeowners are unlikely to ever see rates as low as they previously were – so even those with the most perfectly timed remortgage date will feel some pain from higher rates.
“With that as the backdrop it’s no surprise that arrears are expected to shoot up next year and rise again in 2025. We’ve already seen a 30% increase in arrears this year, as people face higher rates and struggle to make their repayments. But UK Finance predicts another 22% increase next year and a further 7% increase the year after. It means that between the start of this year and the end of 2025 56,660 more homeowners will fall into arrears and 2,000 people will see their homes repossessed.
“But there is some good news: arrears aren’t as high as they might have been in previous crisis periods. Unemployment remaining low means that people’s wages aren’t as much at risk, while more stringent stress testing means that many will find the increases in mortgage repayments are still affordable. The current scheme in place to help those who are struggling with repayments will also prevent some homeowners from officially counting as in arrears – but these are temporary measures, so they can only hold back the tide of arrears for so long.
“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.”
