Outstanding mortgage balances with arrears have reached their highest point since 2014, according to the latest figures from the Bank of England.
The first quarter of 2024 witnessed a 4.2% rise in the value of outstanding mortgage balances with arrears from the previous quarter, escalating to £21.3 billion. This marks a 44.5% annual increase and the highest level recorded since the third quarter of 2014.
Additionally, the share of total loan balances in arrears compared to all outstanding mortgage balances rose to 1.28%, a peak not seen since the final quarter of 2016.
“These figures show the devastating consequences that recent years have had on the property market, with rising borrowing rates taking their toll on homeowners across the UK,” said Michelle Stevens, a mortgage commentator at personal finance comparison site finder.com. “The shock of these increasing mortgage rates following a period of ultra-cheap borrowing has forced many households into debt, as they simply cannot keep up with the higher payments once they renew their mortgage. Homeowners are desperate for some relief, and the Bank of England needs to take action to bring the base rate down soon if we hope to see any improvement to these figures next quarter.”
Simon Gammon, managing partner at Knight Frank Finance, remarked, “The proportion of the total loan balances in arrears is still relatively low at 1.28%, though Bank of England policymakers will be watching this data closely. Mortgage rates are currently trading sideways and barring any nasty surprises, should continue easing once the timing of the Bank of England’s first cut to the base rate becomes clearer.”
The data also showed a 2.6% decrease in the value of gross mortgage advances from the previous quarter, down to £51.6 billion — the lowest since the second quarter of 2020, and 12% lower than a year earlier. In contrast, the value of new mortgage commitments rose sharply by 30.8% from the previous quarter to £60.1 billion, marking a 31.2% year-on-year increase.
The share of gross mortgage advances for house purchase for owner occupation dropped by 5.1% from the previous quarter to 54.6%, but was 4.3% higher than a year ago. The share for owner-occupier remortgages increased by 3.5% from the previous quarter to 31.8%, though it remained 2.9% lower than a year earlier.
Notably, the share of gross buy-to-let mortgage advances rose by 1.2% from the previous quarter to 8.3%, the first increase since the first quarter of 2022, though it was still 1.6% lower than a year ago.
The outstanding value of all residential mortgage loans decreased slightly by 0.1% from the previous quarter to £1.7 trillion, and was 1.4% lower than the previous year.
Nathan Emerson, CEO at Propertymark, commented, “It is good to see that the value of new mortgage commitments has increased, and that the share of gross mortgage advances for buy-to-let purposes has seen growth. These figures demonstrate that there is positive economic news out there despite elevated interest rates. Propertymark remains positive that overall economic activity in the housing market will further increase once the Bank of England feels ready to start cutting interest rates and when we have more certainty about housing policies following the election of a new government next month.”