BoE mortgage arrears data shows devastating impact of high mortgage rates

The total value of outstanding mortgage balances with arrears has soared to its highest point since 2014, the latest Bank of England figures have revealed.

The first quarter of 2024 saw a 4.2% increase in the value of outstanding mortgage balances with arrears from the previous quarter, hitting £21.3bn. This marks a 44.5% annual increase and is the highest figure recorded since the third quarter of 2014.

Moreover, the share of total loan balances in arrears compared to all outstanding mortgage balances rose to 1.28%, reaching a peak not seen since the final quarter of 2016, the report highlighted.

Michelle Stevens, mortgage commentator at personal finance comparison site, said: “These figures show the devastating consequences that recent years have had on the property market, with rising borrowing rates taking their toll on homeowners across the UK. The shock of these increasing mortgage rates following a period of ultra cheap borrowing has forced many households into debt, as they simply cannot keep up with the higher payments once they renew their mortgage.

“Homeowners are desperate for some relief, and the Bank of England needs to take action to bring the base rate down soon if we hope to see any improvement to these figures next quarter.”

Simon Gammon, managing partner at Knight Frank Finance, added: “The proportion of the total loan balances in arrears is still relatively low at 1.28%, though Bank of England policymakers will be watching this data closely.”

He added: “Mortgage rates are currently trading sideways and barring any nasty surprises, should continue easing once the timing of the Bank of England’s first cut to the base rate becomes clearer.”

The data also revealed that the value of gross mortgage advances fell by 2.6% from the previous quarter to £51.6bn, the lowest since the second quarter of 2020, and was 12% lower than a year earlier.

However, the value of new mortgage commitments — lending agreed to be advanced in the coming months — jumped by 30.8% from the previous quarter to £60.1bn, up 31.2% on a year ago.

The share of gross mortgage advances for house purchase for owner occupation fell by 5.1% from the previous quarter to 54.6%, but was 4.3% higher than a year earlier.

The share of gross advances for owner-occupier remortgages rose 3.5% from the previous quarter to 31.8%, but remained 2.9% lower than a year ago.

The share of gross buy-to-let mortgage advances — covering house purchase, remortgage and further advances — rose by 1.2% from the previous quarter to 8.3%.

This was the first rise since the first quarter of 2022, but remains 1.6% lower than a year ago.

The outstanding value of all residential mortgage loans slipped by 0.1% from the previous quarter to £1.7trn, and was 1.4% lower than the year before.

Nathan Emerson, CEO at Propertymark, commented: “It is good to see that the value of new mortgage commitments has increased, and that the share of gross mortgage advances for buy-to-let purposes has seen growth. These figures demonstrate that there is positive economic news out there despite elevated interest rates.

“Propertymark remain positive overall economic activity in the housing market will further increase once the Bank of England feels ready to start cutting interest rates and when we have more certainty about housing policies following the election of a new government next month.”



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One Comment

  1. EChrisG

    This just shows the ignorance of some within the housing industry. Mr Emerson and Ms Stevens make it sound like the BoE are going to be the answer to everything, but they clearly don’t understand the current mortgage market. Circa 85% of all UK mortgage holders are on a fixed rate, according to data I saw in Q4 2023, so a drop in the base rate will barely move the needle for most people. And mortgage pricing is not based on the current BBR, but on swap rates and wider market forces, so the current mortgage prices are already in anticipation of at least one BBR cut in the next 6-12 months.

    People sitting around waiting for the BoE to make their mortgages cheaper could be waiting a long time!


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