As interest rates continue to rise and the cost-of-living soars, figures show that UK mortgage arrears have increased to record levels. It is widely expected that the Bank of England will hike interest rates on Thursday. Many expect the Bank of England to raise rates by at least 25 basis points.
With arrears already at higher levels than the previous record in 2010, the expected interest rate hike this week could push more households over the financial edge. At the end of the first quarter of this year, there was £2.05 billion of delinquent mortgage debt, according to figures from the tax and advisory company Mazars.
Situation continues to worsen for many households
According to Matthew Carter, a partner at Mazars, the situation continues to worsen for many households across the UK.
He said, “As the cost-of-living crisis evolves, UK mortgage lenders are now seeing arrears start to build. People will typically make a lot of sacrifices to meet their mortgage payments, but these figures indicate that things are starting to get worse for some families.”
Carter added, “Given that interest rate rises have yet to hit most people on fixed-rate mortgages, there is a risk that this is just the beginning of problems in the mortgage market.”
The Mazars data showed that there had been a drop in the number of mortgages that had fallen into arrears with formal arrangements in place, such as a mortgage holiday or rescheduled repayments. This has dropped from 36% in 2010 to less than 20% in the current climate.
As a result, the level of repossessions carried out by mortgage lenders is likely to increase because most of those falling into arrears have not come to any proper arrangement with their lenders.
According to Carter, it was a serious concern that so many people were falling behind with their mortgage repayments without coming to some form of arrangement with their lenders. He described this as a ‘red flag’ and said that it was a sign that these households were already experiencing severe financial issues.
Households having to choose what they pay
Carter also highlighted that living costs and interest rate hikes have resulted in many households having to choose what they pay from the many essential costs they are juggling. With soaring energy prices, rocketing food prices, and a series of interest rate hikes with more to come, many have been unable to keep on top of their essential financial commitments.
He went on to say, “The cost-of-living crisis means that some people are having to choose which bills they don’t pay this month. Unfortunately, that road will end in enforcement against those arrears for some.”