"Many borrowers, the majority of whom are coming to the end of a fixed rate term, are facing increased financial pressure and this is driving an uplift in the number of those falling into arrears with their mortgage payment"
New analysis by House Buyer Bureau studied data from the Bank of England on the level of residential mortgage arrears across the UK market, as well as the balance outstanding and how this has changed in recent months and found that, despite interest rates increasing since December 2021, the level of mortgage arrears has been in steady decline.
Prior to the pandemic, there were 182,545 arrears seen in the first quarter of 2019, falling to 170,499 by the final quarter of the year.
This total continued to decline throughout the pandemic property market boom, falling to 154,473 in Q4 of 2021 when the first rate hike was implemented.
Even with a year of consistent base rate hikes, the number of mortgage arrears fell to a quarterly low of 150,464 in Q3 of 2022, with the balance outstanding also down to a low of just over £13m.
However, in September 2022, the Government plunged the mortgage sector into turmoil following a disastrous mini-budget, which saw the number of mortgage products available plummet, while mortgage rates climbed considerably.
While an air of stability has returned, borrowers have had to adjust to the higher cost of borrowing, wider economic uncertainty and a string of further base rate hikes.
As a result, the number of those in arrears with their mortgage climbed from 150,464 in Q3 of last year to 154,234 in the final quarter. This increase has continued during the early stages of this year, with total arrears hitting 158,577 in Q1 2023, marking a 2.8% quarterly increase and a 3.7% annual jump.
The outstanding balance of these arrears is also up, hitting £14.9m during the first quarter of this year, a 9.5% increase on the previous quarter and 12.5% higher than this time last year.
Managing Director of House Buyer Bureau, Chris Hodgkinson, commented: “A combination of mortgage market instability and increasing interest rates have pushed the cost of borrowing up considerably in recent months.
"Many borrowers, the majority of whom are coming to the end of a fixed rate term, are facing increased financial pressure and this is driving an uplift in the number of those falling into arrears with their mortgage payment.
"The sum outstanding has also increased and this highlights the perilous position we currently find ourselves in when it comes to the overall health of the property market.
"In fact, we’ve seen a 144 % increase in the number of homeowners opting to sell their home quickly, stating financial difficulty as the primary reason for doing so, when compared to last year.
"While this increase isn’t completely due to the climbing cost of borrowing, it’s certainly a factor in the majority of cases.”