Mortgage arrears are up to their highest level in a decade according to Bank of England data, as people continue to struggle with the cost-of-living, experts say.
According to the Bank, the value of outstanding mortgages that were in arrears during the first quarter rose 44.5% year-on-year to £21.3billion. That is the highest level for arrears since the third quarter of 2014.
Additionally, its data shows that the proportion of loan balances in arrears rose by 30 basis points from 0.88% to 1.28% during the first quarter, to its highest level since the October to December quarter in 2016.
Mortgage experts attribute the increase in arrears to inflation, which saw the Bank’s Monetary Policy Committee ratchet up its base rate from 0.1% to 5.25%, and the resulting squeeze on household incomes.
Tom Cuppello, risk director at Broadstone, said: “The continued increase in outstanding mortgage balances with arrears is a clear economic indicator that we are not out of the woods yet. It suggests that many households are still struggling with the cost-of-living crisis and spike in mortgage rates over the past two years.
“It is concerning that we have seen such a steep rise in those struggling to make their mortgage repayments as it paints a worrying picture of the nation’s personal finances following the recent squeeze on household budgets.”
Pepper Advantage analyst Abigail Fernandes said that although arrears had risen, they rate that they are growing at is slowing.
She pointed out that quarter-on-quarter, the proportion of loan balances in arrears rose 5 basis points in the first quarter, versus increases of 11 and 12bps in the fourth and third quarters of 2023. In value terms, they rose £900million in the first quarter, compared to rises of £1.8billion and £2billion in the preceding quarters.
“Mortgage arrears balances are still high but growth is slowing,” she said. “Even with green shoots appearing, the economic picture remains complex, and certain groups remain under pressure and will likely require support for some time.”
The Bank’s data, which included input from 340 mortgage lenders and administrators, also found that gross mortgage lending by banks dropped 12% year-on-year to £51.6billion, its lowest level since the second quarter of 2020.