A top credit ratings agency has warned that mortgaged homeowners in the UK are more at risk of falling into arrears than in any other major developed country.
Fitch Ratings said the share of homeowners missing more than three months of mortgage payments will double in 2023 to 1.5% as high rates hit borrowers.
Based on the current number of residential mortgages in the UK, this means 135,000 households will be in arrears.
Banks in the UK are more exposed to the housing market than in any of the 10 developed markets ranked by Fitch – which included Canada, the USA, Germany, Australia and Italy.
Monsur Hussain at Fitch, said: “The UK scores the worst in terms of borrower risks.”
Fitch has forecast that the Bank of England will raise the Bank Rate to a peak of 4.75%, up from 4% currently, by May this year.
Jessica Hinds, director of economics at Fitch, said: “We have seen much bigger increases in mortgage rates, the Bank of England started tightening much earlier, and we have shorter mortgage terms than in other countries.”
Significantly, British borrowers fix for short periods of two or five years, whereas buyers in the US commonly fix for around 25 years.
In the year to November 2022, average mortgage rates in the UK jumped by 4.5 percentage points, compared to 3.5 points in the US, Mr Hussain said.
The housing market in the UK has come under pressure after mortgage rates soared in the wake of Kwasi Kwarteng’s mini-budget which sparked chaos in financial markets.
Rates have since started to fall but worries over employment prospects and the impact of soaring inflation have continued to keep a lid on activity.
