Editor's Pick

Arrears rise 44 per cent in a year

Arrears rise 44 per cent in a year
Christina Hoghton
Written By:
Christina Hoghton

Despite a sharp annual increase, arrears still account for just 1.14 per cent of outstanding mortgage balances.

According to the Bank of England, the value of outstanding mortgage balances in arrears rose by 11.4 per cent between the second and third quarter of this year, to reach £18.8bn.

This was a massive 44 per cent higher than a year earlier.

While the overall value of arrears is up sharply, new arrears cases actually fell by 0.3 percentage points between quarter two and quarter three, to 15.8 per cent of the total outstanding mortgage balances.

This remains 5.1 percentage points higher than a year earlier.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Arrears have reared their ugly heads, with total mortgage arrears up over 10 per cent in a quarter and rising by almost half in a year.

“As a proportion of the total amount lent in mortgages, it hasn’t been this high since the middle of 2017.

“It’s hitting people with bigger mortgages harder, because while the total amount in arrears is soaring, the total number of borrowers was up less dramatically over the year – and actually fell over the quarter.

“It reflects how those who stretched their finances to get onto the property ladder, or trade up, are paying a horrible price for it now as their mortgage deals come to an end.

“And the pain is far from over. Given the predominance of fixed rates in the market, the squeeze on our finances caused by sharply higher rates isn’t going to come as a short, sharp shock, but as a nasty squeeze on a small section of the mortgage market each month, over a horribly prolonged period of time.”

Worried about paying your mortgage?

If you’re worried that you won’t be able to make a mortgage payment, now or in the near future, speak to your lender as soon as possible.

They are expecting these calls and have people ready to help with a range of potential options. You may be able to temporarily reduce your repayments by moving to an interest-only mortgage or by extending your term, for example.