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Number of people in arrears on their mortgage climbs by 25%

by | Feb 8, 2024

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Laura Suter, director of personal finance at AJ Bell, has commented on the latest UK Finance figures on mortgage arrears.

She said: “The number of people in arrears on their mortgage has jumped by 25% in the past year, as homeowners feel the pressure from 14 consecutive interest rate increases. The figures show that in the last three months of 2023 another 5,750 mortgages fell into arrears, taking the total to almost 94,000, as people came to the end of their fixed-rate deal and faced the reality of far higher interest rates. At the same time some people will have fallen onto their standard variable rate (SVR) and found the eye-watering default rates unaffordable, while others will have seen their tracker mortgage gradually increase with each rate rise to the point of unaffordability. 

“Even more dramatic are the figures on how many landlords are in arrears, with the figure for buy-to-let mortgages jumping by 124% at the end of 2023, when compared to a year earlier. While landlords have enjoyed a rental boom in the past couple of years, many have found their mortgage costs are higher than the rent they are receiving. On top of that, many are finding it impossible to keep up with mortgage payments if they have any periods where the property is vacant. 

“These figures also only classify homeowners as behind on their mortgages if they owe more than 2.5% of the mortgage value in arrears – for a £400,000 mortgage that would mean they were £10,000 behind on their payments. Because of this classification it’s likely there are far more people who are slightly in arrears and will appear in the figures in coming months. 

“On the plus side, repossessions remain low. Making year-on-year comparisons is tricky because repossessions were halted during the pandemic, skewing the figures. But they remain far below the financial crash highs. However, the figures don’t tell the full story. As part of the Mortgage Charter agreed between the government and major lenders, there is pledge that homes won’t be repossessed in 12 months. It means we could see a boom in repossessions once that 12 month stay of execution has expired. 

“Despite mortgage rates falling so far this year, it’s clear these arrears figures will keep rising. While a drop in mortgage rates is welcome, anyone coming to the end of a two or five-year fixed-rate deal will find they are facing far higher costs – which understandably will be unaffordable for many. Anyone who is struggling to pay their mortgage or thinks they will struggle should approach their lender as soon as possible. You can get help and guidance on your options without it impacting your credit file.”

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