Mortgage delinquencies have reached their highest level in seven years
Mortgage delinquencies have reached their highest level in almost seven years as rising interest rates and rising costs of living pile pressure on borrowers.
The value of outstanding home loans in arrears rose by a “staggering” 13 per cent to £16.9 billion in the second quarter of this year, Bank of England figures released yesterday showed.
It was the highest level since the third quarter of 2016 and 29 percent higher than the same period a year ago and is likely to further fuel calls for the bank to cut interest rates.
Separate data from the Office for National Statistics showed signs of a downturn in the UK labor market, with employment numbers falling sharply.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, told Newspage: “The rate at which mortgage arrears are increasing is frightening and should be cause for pause at the Bank of England’s next rates meeting.”
Squeezed: The value of outstanding home loans in arrears rose by a “staggering” 13% to £16.9bn in the second quarter of this year, Bank of England figures released yesterday showed
“This is terrible data and we know it will get much worse, with 1.6 million mortgage holders having to renew their mortgages in the next 12 months at significantly higher interest rates than anyone has been used to in more than a decade.”
The bank’s figures reflect the value of outstanding mortgage balances where the borrower has failed to make contractually agreed payments of at least 1.5 percent of the outstanding mortgage balance.
This means 1.02 percent of total home loans are delinquent, up from 0.89 percent in the first quarter and the highest level since the start of 2018.
The figures also showed that the outstanding value of all residential mortgages stood at £1.66 trillion at the end of June, up 0.4 percent year-on-year but down 1.2 percent quarter-on-quarter.
It was the largest such decline since comparable records began in 2007.
The value of home loans paid out in the second quarter was a third lower than a year ago at £52.4 billion, marking the weakest quarter for the mortgage market since the second quarter of 2020 at the height of the pandemic.
It comes after 14 consecutive rate hikes.
Interest rates are at 5.25 percent and are due to rise again to 5.5 percent next week, although Bank of England governor Andrew Bailey has suggested the hikes could soon come to an end.
Simon Gammon, managing partner at Knight Frank Finance, said the “vast majority” of outstanding mortgages had been issued under post-financial crisis rules, which were stricter on affordability.
“Although mortgage payments are painful at today’s interest rates, they are still technically affordable,” he said.