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Homeowners having difficulty paying their mortgages

Journalist: Newsteam, Newsteam

ended 23. August 2023

According to UK Finance, more homeowners are having difficulty paying their mortgages. In Q2 of 2023, 81,900 mortgages were in arrears of 2.5% or more of the outstanding balance, a 7% increase from the previous three months.

The last 12 months have been challenging for many households as they struggle to cope with factors beyond their control.

Some have resorted to unsecured credit, while others are doing their best to keep up with their mortgage payments.

Interested to hear feedback from mortgage brokers

  • Are you seeing this as a common trend?
  • Do you feel clients are informed well enough of signposted help, from mortgage advice, debt advice, health/mental advice and lender helplines?
  • Do you see the remainder of 2023 and all of 2024, worsening arrears trends?

7 responses from the Newspage community

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These figures will only be the tip of the iceberg. Many are already struggling to keep up with the cost of living never mind the payment shock that the expiry of their fixed rates is going to cause. The number will surely increase over time with more ultra-low fixed rates ending. We see many people who are at the tipping point, trying to balance up the mortgage, cost of living and unsecured credit commitments. Anyone in this situation must seek professional financial advice as soon as possible to attempt to mitigate the problem and create as much household resilience as possible. Ignoring the problem will lead to a worsening situation, a problem that is all too common.

The hikes in mortgage payments borrowers are experiencing as their previously low-rate deals come to an end, may have been manageable if it was not on the back of every other household cost having already increased. This now for many is a final straw and those who cannot re-structure their mortgage are left with few options. I would expect to see arrears levels continue to grow as more and more households become affected by this. The Government and the Bank of England have done nothing to help with this problem and the latter have exasperated it through constant incessant unwarranted increases in the base rate that have had zero impact on the underlying causes of inflation. It is key for anyone struggling with their mortgage to seek advice from a broker or their lender to explore all options that may be able to alleviate their situation.

Sad stats indeed and will continue to grow. Fortunately for our back book of clients, many can cope with the increases in mortgage repayments, and are making adjustments with day-to-day living expenses, but have had isolated cases where this is not possible, and have been lucky enough to look at alternative payment methods for their mortgages including part interest only, part repayment. Have identified more vulnerable clients however with a build-up of unsecured debt, which 12-18 months ago, would not have been the case

In spite of lenders doing more to signpost people to sources of help such as Step-Change debt charity, it’s clear the messages aren’t always getting through. That’s perhaps not surprising as people in serious debt often don’t open mail, let alone read to the end of the letters. It’s a common theme. Whilst debt is an issue still steeped in stigma borrowers often don’t know what to ask let alone who to ask. Fear and overwhelm prevent many people from seeking help in a timely manner.This is a key reason Finanze operate a distressed debt desk where borrowers can speak to one of our team who is a specialist in mental health and debt. We understand the complexities of financial stress and can offer additional reassurance and signposting in a confidential and inclusive way. Without additional intervention from lenders to include offering those in debt forbearance schemes such as payment holidays and better rates for those coming out of fixed rate deals, the situation is likely to worsen.

As a responsible mortgage broker, we do rigorous affordability checks and budget planning with all of our clients. We are also very proactive in contacting our clients before their fixed rates end to review their circumstances. As low fixed rates roll off onto higher interest rates this will undoubtedly put pressure on affordability. However mortgage lenders have been required to stress test affordability for quite some time, so we should see the benefit of this now rates have risen. Overall I expect mortgage arrears to stay low as people prioritise their mortgage payments, but of course, disposable income for households is going to be much lower as the larger mortgage payments eat up a bigger chunk of family income.

Unsurpisingly as rates have gone up and everything else is a bit more squeezed, household budgets are under pressure. My advice to anyone has to be to reach out for help the moment you realise you are in a bit of a pickle - the deeper the hole gets, the more limited your options. Early interventions such as looking at a mortgage term or consolidating debts could very well stop clients falling down a slippery slope. That's exactly when a good mortgage broker can help.

Luckily, we haven't had any clients talking to us about this and I hope that means they are all ok. It does seem such a shame though that there are people struggling with payments, especially those that applied during the times that stress testing is in place. It does make you wonder what happened to mean that cannot afford it now? Was stress testing stringent enough? Did their circumstances change? I wonder if the government will step in to help those who have had unexpected changes happen? More than they have already I mean. I hope that lenders customers can talk to them when needed too.