Copy article

Bank of England: Value of outstanding mortgage balances with arrears 50.3% higher than a year earlier

ended 12. March 2024

The Bank of England has just published its Mortgage Lenders and Administrators Statistics: 2023 Q4 report, which showed the value of outstanding mortgage balances with arrears increased by 9.2% from the previous quarter, to £20.3 billion, and was 50.3% higher than a year earlier. The proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.12% to 1.23%, the highest since 2016 Q4. (other key findings below). Newspage asked brokers for their thoughts, bottom.

  • The outstanding value of all residential mortgage loans decreased by 0.1% from the previous quarter to £1,657.6 billion, and was 1.1% lower than a year earlier 
  • The value of gross mortgage advances decreased by 13.4% from the previous quarter to £54.0 billion, and was 33.8% lower than a year earlier 
  • The value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 6.6% from the previous quarter to £46.0 billion, and was 21.2% lower than a year earlier. If the onset of the Covid-19 pandemic is excluded, this was the lowest observed since 2013 Q1
  • The proportion of lending to borrowers with a high loan to income (LTI) ratio decreased by 2.6pp from the previous quarter to 42.7%, and was 6.6pp lower than a year earlier 
  • The share of gross mortgage advances for house purchase for owner occupation increased by 1.0pp from the previous quarter to 58.7%, and was 3.3pp higher than a year earlier 
  • The share of gross advances for remortgages for owner occupation decreased by 0.8pp from the previous quarter to 29.7%, but was 2.3pp higher than a year earlier 
  • The share of gross mortgage advances for buy-to-let purposes (covering house purchase, remortgage and further advance) decreased by 0.5pp from the previous quarter to 7.0%, the lowest since 2010 Q3, and 4.9pp lower than a year earlier 
  • New arrears cases decreased by 2.6pp from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2pp higher than a year earlier

13 responses from the Newspage community

Copy all

Star Quote
Copy

Platinum
Craig Fish
Director at Lodestone Mortgages & Protection
This report clearly demonstrates the real struggles being faced in the mortgage market right now. The total amount of arrears is not at all surprising given that we are in a significantly higher interest rate environment. People are genuinely struggling to afford their significantly increased mortgage payments. However, it is encouraging to see the number of new arrears cases decrease slightly, but it's likely that this could change during the course of 2024. The significant reduction in new mortgage lending, 6.6% down on the quarter and 21.2% down on the year, shows the difficulty people are having in obtaining a mortgage. Let's hope these numbers serve as a wake-up call to the decision makers on Threadneedle Street that something has to be done sooner rather than later. Looking back in hindsight at the missed opportunity could prove to be a fatal mistake.
Star Quote
Copy

Platinum
Michelle Lawson
Director at Lawson Financial
This data makes for grim reading but is sadly not unexpected. People don’t have bottomless pockets and this data places stark emphasis on that fact. Household finances are set to spontaneously combust if the current level of pressure on them continues. You'd like to think the Monetary Policy Committee will read this report given that the Bank of England produced it.
Star Quote
Copy

Platinum
Ben Perks
Managing Director at Orchard Financial Advisers
No shock here at all. I feared we would start to see some sharp increases in arrears being reported over the coming months. The Mortgage Charter, whilst helpful, hasn't provided the respite that borrowers needed and has just caused a backlog in the inevitable increase in arrears. With debt charity StepChange reporting last month that 1 in 4 borrowers had used unsecured credit to pay a mortgage payment, real figures could be even higher than reported. Household budgets are stretched beyond belief and surely now the Bank of England must reduce the base rate to ease the strain people are under. Arrears figures will continue to rise unless action is taken now. It's that simple.
Star Quote
Copy

Premium
Denni Tyson
Mortgage and Protection Advisor at Henchurch Lane Financial Services
The arrears data is no surprise given the mortgage shock being felt by so many households across the UK. A decade and a half of cheap borrowing has had a huge effect on certain households and placed them under a lot of pressure now that rates have risen. Also to note is how mortgage advances have increased where households have perhaps consolidated some payments that can no longer be repaid in conjunction with a higher mortgage payment. The Bank of England hiking rates so much in such a short time period has resulted in a dire state of affairs. The housing market desperately needs some stability and a boost, otherwise, the figures in the next report will be an even worse read.
Star Quote
Copy

Robert Timm
Managing Director at Sunland Mortgages
With mortgage rates as high as they are, and households reeling after the pandemic and cost of living crisis, this kind of data was inevitable. There will be a lag on this data too, as more and more borrowers will be rolling off low fixed rates onto significantly higher rates. If anyone is struggling, they should engage with their current lender, who will hopefully have signed up to the Mortgage Charter, and have options available to help in the short term. I myself have had three clients come to me who have been able to use these options for a short term fix, and it helped them massively. Borrowers shouldn’t suffer in silence.
Star Quote
Copy

Amit Patel
Adviser at Trinity Finance
This bleak data is all thanks to Truss, Kwarteng, Andrew Bailey and his cohorts, with the exception of Swati Dhingra. As more borrowers come to the end of their fixed rate products, this figure will increase exponentially. The Bank of England's Monetary Policy Committee have the necessary tool at their disposal to remedy the situation, but are they smart enough to use it? We need rate cuts, and soon.
Copy

Platinum
Elliott Culley
Director at Switch Mortgage Finance
The effect of all the base rate increases we've had is finally hitting home. There was always going to be a lag in the data from when the changes were made, and we are now at a point where borrowers are feeling squeezed. Sharp rises in interest rates were always going to result in higher level of arrears and this is an unfortunate consequence of the economic situation we are experiencing. If this data is anything to go by, it would appear we are close to our first base rate reduction.
Copy

Platinum
Justin Moy
Managing Director at EHF Mortgages
These are very alarming figures. When arrears have been low for so long, any increase looks significant. It's worrying though when we have so many borrowers yet to feel these higher rates and the Mortgage Charter has also given 6 months of interest-only relief, too. Family help, and the use of unsecured finance, just to make ends meet each month is not sustainable, and we are on the precipice of financial disaster if action is not forthcoming from both the Government and the Bank of England. Government schemes like Help to Buy have fuelled this problem, and the Government need to find a suitable strategy to relieve this pressure.
Copy

Platinum
Ranald Mitchell
Director at Charwin Mortgages
The punishing rate climate is taking its toll on many mortgage holders, and they're simply not coping. The value of outstanding mortgage balances with arrears is over 50% higher than 12 months ago, and there are still 1.5 million fixed rate maturities this year, so things are only likely to worsen. Mortgage lending is also slowing considerably, down 13% from the previous quarter and a staggering 33.8% year on year. Alongside worsening jobs data, and a slowdown in wage growth, the Bank of England should start cutting the base rate sooner rather than later.
Copy

Charles Breen
Founder at Montgomery Financial
There is a clear jump in mortgage arears over the past year as homeowners feel the squeeze of the cost of living crisis and a tone deaf Monetary Policy Committee that is pushing homeowners to breaking point. When will the Bank of England wake up, do the right thing and give homeowners some respite?
Copy

Gary Bush
Financial Adviser at MortgageShop.com
To read that UK mortgage arrears increased 9.2% in the last quarter of 2023 from the previous quarter to £20.3 billion is tragic news and to further drill down into this dataset that there is a staggering 50.3% more arrears is worrying news. This is an alarm call to the Bank of England for their upcoming monetary policy meeting that surely enough is enough and they need to come down from their ivory tower and see the suffering of the population. From further analysis we can see that gross mortgage advances from banks and building societies decreased by 13.4% from the previous quarter - highlighting the new mortgage borrowing slowdown we have seen.
Copy

Mark Robinson
Managing Director at Albion Forest Mortgages
Whilst all the stats out of the Bank of England are certainly unwelcome, they are not unexpected. The cost of living crisis has hit hard, and whilst many may not be feeling it as hard as others, it has certainly taken its toll with a high percentage of mortgage holders.
Copy

Gareth Davies
Director at South Coast Mortgage Services
These are not good stats to read, but in reality we shouldn't be surprised. Households have been pushed to the max with the level of rate increases seen over the last 18-months or so. Given the lag in this data I wouldn't be surprised to see it get even worse, too. People are struggling to make payments on their mortgage, but banks and utility providers are still making record profits off them.