UK households struggled to keep up with their mortgage payments in the last half of 2023, new figures show.
The Household Finance Review, published this week, showed there was a 24 per cent rise in the number of homeowners in mortgage arrears in the third quarter of 2023 compared to a year earlier.
The report from UK Finance said arrears numbers first showed a “marginal increase” in the final quarter of 2022 and since then there has been further and more material increases in borrowers behind on their payments.
It is expecting this trend to continue into the end of this year with a larger increase on the cards.
“Arrears saw an expected larger rise in Q3, with signs that more increases lie ahead,” the report read.
“Cost and rate pressures have pushed more customers into a payment shortfall and increased the pressure on those already in arrears.
“However, arrears cases continue to be mainly older mortgages, with very few mortgages underwritten since FCA mandated stress tests came into force now entering arrears.”
Laura Suter, director of personal finance at AJ Bell, said there are still many homeowners who have been unaffected by higher interest rates as they are yet to remortgage onto a “dramatically higher rate”.
She said: “Some homeowners might take comfort from the fact the Bank of England appears to have halted its rate hiking cycle and that mortgage rates have subsequently dropped slightly.
“But there is still a huge gulf between current mortgage rates and the far lower fixed-rates that many homeowners will be coming off. We know that around 1.6 million mortgage deals are due to end in 2024 and until we see meaningful cuts from the Bank of England those homeowners will still be paying hundreds, and in many cases thousands, more each year for their mortgage.”
In June, the government announced a new mortgage charter, backed by 30 lenders, which means borrowers will not be forced to leave their home without their consent, unless in exceptional circumstances, in less than a year from their first missed payment.
It also means those struggling to pay their mortgage can switch to an interest-only product, make part-payments or extend their term in order to make their monthly payments more manageable.
However, Suter added that at the moment these are temporary measures and will not prevent many from falling into arrears.
She advised those struggling, or anticipating they may struggle, to pay their mortgage to speak to their lender as soon as possible for advice without affecting their credit file.
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