Mortgage arrears hit 7-year high

The amount UK homeowners are behind with their mortgages rose to the highest level since 2016 in the second quarter of the year, new figures have revealed.

According to Bank of England stats, mortgage arrears rose to £16.9bn – up 29% on the same time last year.

What’s behind the increase?

The increase in interest rates and rising unemployment have meant some families have had to reduce or miss monthly mortgage payments.

Landlords with buy-to-let mortgages have also found it difficult to keep up with repayments in parts of the country where renters are struggling with the cost-of-living crisis.

How are mortgage arrears calculated?

The Bank of England bases its figures on borrowers failing to make payments of at least 1.5% of their outstanding mortgage balance or where their property is in possession.

Mixed reactions from experts

While some experts warn defaults will increase, others say the number missing payments remains relatively low.

Riz Malik from broker R3 Mortgages said:

“The swift escalation in rates was bound to significantly impact default rates, and it's likely the situation will deteriorate further.”

But Simon Gammon from Knight Frank Finance said the proportion of outstanding mortgage balances in arrears is still relatively low at just 1%.

He said:

"While mortgage payments at today's rates are painful and require borrowers to cut their discretionary spending, they are still technically affordable.”

He added the sector most likely to fall behind was buy-to-let mortgages. Mr Gammon explained landlords with unaffordable mortgages only have two real choices – sell or default.

More pain to come for homeowners

The Bank of England is expected to raise interest rates again later this month from 5.25% to 5.5%. This could see mortgage rates rise even further.

Missed a mortgage payment?

If you’re struggling to make your mortgage payments or you’ve already missed a payment, you should speak to your mortgage lender without delay. They have a responsibility to help homeowners who are in financial difficulty.

Find out more in our guide on what to do if you fall behind with your mortgage payments.