Their highest value in seven years in the three months to June, while home loans recorded their biggest ever fall, according to official data published on Tuesday. The Bank of England's quarterly survey of lenders showed that in the second quarter of 2023, the value of outstanding mortgage balances in arrears rose to billion, an increase of 28.8 per cent compared to the same period of the year. last year. The figure is the highest since the third quarter of 2016 and the largest annual percentage increase since. But arrears, defined as borrowers failing to make contractual payments equal to at least 1.5 percent of the outstanding balance or when the property has been seized, remain low compared to the 2008-09 financial crisis. The data reflects the sharp rise in mortgage rates over the past two years, following 14 consecutive interest rate increases by the Bank of England. Markets expect the central bank to raise rates another percentage point to 5.5 percent next week as it seeks to rein in inflation.
Lewis Shaw, founder of mortgage broker Shaw Financial Services, said the speed at which mortgage arrears were increasing was “frightening”. "This is dire data, and we know it's about to get a lot worse, as 1.6 million mortgage Job Function Email Database holders will have to renew in the next 12 months at significantly higher rates than anyone has been accustomed to for over a decade." ", he claimed. saying. According to the same Bank of England data, the outstanding value of all residential mortgage loans fell in the same period by billion, or 1.2 per cent, to trillion compared with the three months to March . This is the largest drop in absolute and percentage terms since records began in Despite the increase to percent in total arrears loan balances, the highest since the first quarter of they remain well below an all-time high of percent in the first quarter of.
This is partly due to much stricter regulations on mortgage affordability, which were introduced after the financial crisis, as the full impact of higher interest rates has not yet been passed on to many households on fixed-term deals. two and five years. . Jamie Lennox, director at Norwich-based brokerage Dimora Mortgages, said: “Much of the damage from 14 consecutive base rate rises has yet to filter through. "The percentage of arrears in 12 to 18 months, when more people have exited their ultra-low rates, could be dramatically higher," he added. Bank of England data also showed the proportion of gross mortgage advances for buy-to-let purposes was 8.1 per cent, the lowest level recorded since the final quarter of 2010. Karen Noye, a mortgage expert at wealth management company Quilter, said the data pointed to “an exodus of landlords from the housing market as tightening tax laws on buy-to-let rentals make them a less attractive investment.