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UK mortgages in arrears hit an nearly eight-year excessive within the first quarter of 2024, based on official knowledge that underlines the persevering with affect of excessive borrowing prices on households.
The proportion of whole mortgage balances with arrears, relative to excellent mortgage balances, rose to 1.28 per cent within the three months to March 31 from 1.23 per cent within the earlier quarter, the Financial institution of England stated on Tuesday.
The determine marked a continued reversal of a long-term decline in overdue funds and the best share for the reason that ultimate quarter of 2016, when it stood at 1.24 per cent, and level to the challenges going through many citizens forward of the final election on July 4.
Excessive store costs, rents and mortgage prices are placing stress on Prime Minister Rishi Sunak’s marketing campaign message of an enhancing financial system, together with his governing Conservative get together about 20 share factors behind Labour in opinion polls.
Simon Gammon, managing companion at consultancy Knight Frank Finance, stated: “The value of mortgage balances in arrears has surged as household finances have come under pressure from both higher mortgage rates and the rising cost of various goods and services.”
Whereas the rise in arrears was “serious” for individuals struggling to pay their mortgages, “it doesn’t yet present a systemic risk to the housing market”, he added.
Arrears are nonetheless low in contrast with their all-time excessive of three.64 per cent within the first quarter of 2009, throughout the international monetary disaster. They’ve since declined on the again of the broader financial restoration and modifications to mortgage rules.
However extra households are set to face larger mortgage prices this yr as mounted offers agreed two or 5 years in the past expire.
Mortgage charges rose sharply between late 2021 and 2023 because the BoE lifted rates of interest to a 16-year excessive of 5.25 per cent in a bid to tame inflation.
They’ve eased from their peak in summer time 2023 on expectations that the BoE will begin slicing rates of interest this yr, however they’ve edged up since February on the again of disappointing inflation and wage knowledge.
Separate knowledge printed by the BoE final week confirmed that the quoted 2-year mortgage price on a 60 per cent mortgage to worth rose to five.01 per cent in Could, up from 4.62 per cent in January however effectively under the 6.22 per cent in July 2023.
Abigail Fernandes, analyst at credit score administration firm Pepper Benefit, stated the info on Tuesday confirmed that “certain groups remain under pressure and will likely require support for some time”.
