Market News

The proportion of UK mortgages in arrears has risen to its highest level since 2016 as households continue to struggle with high interest rates.

The value of outstanding mortgage balances with arrears increased by 9.2% between October and December from the previous quarter, to £20.3bn, and was 50.3% higher than a year earlier, according to Bank of England data.

The figures, provided by around 340 regulated mortgage lenders, showed the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, rose on the quarter from 1.12% to 1.23%, which was the highest since 2016.

Karen Noye, mortgage expert at Quilter, said: "This shows that the large increase in mortgage rates seen over the last couple of years is really starting to bite for some borrowers and this is unfortunately causing them to fall into arrears as they simply can’t afford to keep up with their increased payments.

"The changes to national insurance and child benefit at the budget last week, will barely help considering many people will have seen their mortgage payments shoot up by £300 or more a month.”

The value of new mortgage commitments fell by 6.6% from the previous quarter to £46bn, and was 21.2% lower than a year earlier.

The data also revealed that the share of mortgage advances for buy-to-let purposes fell by 0.5% from the previous quarter to 7%, the lowest since mid-2010.

"Positively, the statistics show that new arrears cases decreased by 2.6% from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2% higher than a year earlier. This may well continue to climb again though as more people come off fixed term mortgages set when rates were low,” Noye added.

The figures come as a raft of mortgage rate increases among the biggest lenders, including NatWest (NWG.L), Santander (BNC.L), and Halifax, have been announced.

Halifax, the UK’s biggest mortgage lender, told brokers that several home loans for new buyers would go up by up to 0.2 percentage points on Wednesday.

NatWest is increasing rates by up to 0.1 percentage points on some two- and five-year deals for existing customers switching their mortgages.

Meanwhile, Santander announced increases across its new business and product transfers ranges, including selected residential fixed rates increasing by between 0.02 percentage point and 0.36 percentage points.