Copy article

Will there be a rise in missed mortgage payments next year?

Journalist: Jake Carter, Mortgage Introducer

ended 17. November 2022

With rising interest rates and rising fuel prices, could there be a spike in missed mortgage payments in January and February next year? 

Are lenders expecting this?

Are lenders gearing up for this and how should they work with brokers to help?

Should lenders be giving a "payment holiday" like we saw in Lockdown?

7 responses from the Newspage community

Copy all

Copy

Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Lenders are expecting there to be more delinquent loans next year and have set aside provisions for this as can be seen in latest financial statements from the banks. It's not just interest rates and energy bills, but food and clothing inflation as well as a much higher tax burden that's leaving homeowners with even less money. Without doubt there will be flexibility from lenders for customers who are in financial trouble. Most economists don't expect rates to stay high much past spring, and this could bring some respite to those on flexible rates. Inflation should fall back to normal levels, too. Lenders will be looking to offer payment holidays and temporarily switch clients to interest only options if their budgets have been squeezed.
Copy

Editor
Mike Staton
Director at Staton Mortgages
I think it's inevitable that we will see an increase in missed payments in 2023. A lot of borrowers saw the historic low interest rates thrown about during the pandemic as a chance to buy the house of their dream and saw it as a good opportunity to go to maximum affordability. Now maximum affordability could be costing them £300 to £400 extra per month, add that to a £200 increase in energy bills per month, £100 extra on fuel costs and £100 extra on your monthly food shop, and some people won't be able to pluck £800 out of thin air. We are bracing ourselves for a wave of adverse credit applications due to missed payments. I think we will see the repercussions of these hikes for the next 10 years. Payment holidays were pure waffle in the pandemic, as lenders have always offered them. Boris made it look like a new thing, which led people to believe they were risk free. Whilst they did not affect people's credit score, they did affect people's ability to borrow, as mortgage providers would not lend to people who were in financial difficulty. This is going to be the same again. Basically we have stopped the bus and got back off in 2020. I expect to see Bill Murray playing the piano in Groundhog Day soon.
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Many lenders have been planning for an economic downturn for some time. Some are redeploying staff to cope with an increasing number of customers facing financial difficulties due to the current economic climate. If the unemployment rate increases, this will only get worse. Those facing issues need to speak to their lenders as soon as possible and brokers should be encouraging this. They can discuss suitable strategies, which may include repayment holidays or servicing just the interest for a short period of time.
Copy

Graham Cox
Director at Bridging Hub
Mortgage arrears are almost certain to rise early next year. Lenders are already factoring this in and setting aside large provisions to write-off the losses from rising repossessions. I feel for those who were induced to buy during the pandemic by Rishi Sunak's disastrous stamp duty holiday. It fuelled a surge in house prices, which left the vast majority no better off, but with larger mortgage debts. Now they're facing a tripling of their mortgage interest on top of all the other cost of living increases. I think it's likely the government will step in with some kind of support, either by encouraging lenders to provide payment holidays or moving borrowers onto interest-only for a year or two. Otherwise, we'll see an epidemic of homelessness, because many won't be able to afford the rent either. Landlords are selling up, so there will soon be a huge shortage of rented property. What a mess, and all because for three decades both Labour and Tory governments have allowed rampant house price inflation, whilst printing money like it was going out of fashion.
Copy

Natalie Hines
Founder at Premier One Mortgages
I think lenders will be expecting a rise in missed mortgage payments and will have structures in place. Mortgage lenders will be looking to assist borrowers and help where they can by extending their term and, where appropriate, switching to interest only. We know from the quick response by the lenders during the pandemic that they now have the processes in place for payment holidays but I personally don't think we'll see this repeated. The payment holidays were put in place as a response to the pandemic and guidance came from the government. The rise in interest rates and fuel prices could be a longer term situation, meaning payment holidays may not be a long-term solution.
Copy

Amit Patel
Adviser at Trinity Finance
Inevitably, we will see a rise in the number of missed mortgage payments as the cost of living continues to rise with no end in sight. I would hazard a guess that lenders are expecting this throughout 2023 and into 2024. Lenders need to work with brokers and borrowers alike. Payment holidays like we saw during lockdown would be highly beneficially in the short term. If a borrower takes advantage of them then these should not be reported to the credit reference agencies as a 'late payment', as this could hinder a mortgage application in the future.
Copy

Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
In the latest quarter over 74,000 homeowners were in arrears. This was 1% lower than in the previous quarter, however this is also before the energy price cap was lifted and prior to recent base rate and interest rate rises. From our own enquires, it's clear some people are now very worried about their options for paying their priority bills, especially if they are now coming out of previous fixed rate agreements. The hike in monthly mortgage payments, coupled with the increased cost of utilities, food and fuel, are a very real concern with few solutions in sight for many. Family and household budgets are really stretched and a significant number of homeowners will not qualify for any kind of additional help. The strain is not just on the family finances, we're seeing the impact on people's mental and physical health, too. Given we are approaching the 'festive season', it's likely to be a very muted affair for many who have to make stark choices about what they can afford. Lenders can play a critical role in helping many. Offering payment holidays and providing homeowners with the best possible interest rates would be a significant step in the right direction. Sadly when you're struggling financially, getting the most favourable 'package' is unlikely. So, at the point when you need help the most you're effectively considered higher risk and often have to pay significantly more for your borrowing. It compounds the issue when you're trying to budget or trying to repay debt. We'd welcome more dialogue with lenders to create some additional breathing space for homeowners who are under strain.