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Mortgage defaults on the up

Mortgage defaults on the up
Christina Hoghton
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Christina Hoghton

Mortgage lenders said that default rates on mortgages increased in the last quarter of 2023.

According to the Bank of England’s latest Credit Conditions Survey, they are expected to increase further in the first three months of 2024.

Mortgage defaults are significantly higher than they have been for at least five years, apart from during the second quarter of last year, when they were worse.

Unsecured defaults also rise

It’s not just mortgage payments that borrowers are struggling to meet during this cost of living crisis.

Lenders reported that default rates for total unsecured lending (such as loans and credit cards) also increased in quarter four of last year. And they expect further increases in the first quarter of this year.

Worryingly, missed credit card and loan payments, as a percentage of balances, are now higher than they have been for at least five years.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “There was a massive surge in missed debt repayments at the end of last year, as a huge number of those whose finances had been on a knife edge, finally tipped over into a debt disaster.

“Mortgage defaults and missed payments on credit cards and loans both surged. The proportion of balances behind on payments hasn’t been this bad for unsecured borrowing for at least five years – and the only time mortgage lending was worse was in the middle of last year.

“The one glimmer of hope in these figures is a slight pick-up in demand for mortgages. It seems that falling mortgage rates have prompted some buyers to get off the fence and commit to buying a home. The level of demand is so low that it’s going to take an awful lot before sellers are back in business, but it’s a whiff of positivity in a market that has stunk a little for some time.”

Other findings

Lenders said that demand for mortgage lending for house purchase and remortgaging fell in quarter four of last year, although it was expected to rise during the first three months of 2024.

Mortgage supply was up over the same time period, said lenders.