With 14 consecutive rises in the Bank Rate, and despite our research telling us the majority of homeowners are confident they can maintain their mortgage costs for the foreseeable future, we have been keeping a close eye on mortgage arrears data.  

Economic indicators have for some time been predicting a rise in arrears, but with almost nine in ten borrowers on fixed rate products the number of properties with mortgage arrears continued to remain low.  

Latest Bank of England mortgage arrears data 

However, the latest Bank of England mortgage arrears data (MLAR Q2 2023) probably unsurprisingly showed a significant jump, up 13% in the quarter, and 28.8% higher for the year.  The number of cases in arrears is now over 1% of all mortgages for the first time in five years, but still considerably lower than following the financial crisis when they were at 3.64% (Q1 2009).

A closer look shows that the proportion of mortgages in six months or more arrears is around 0.5%, which is comparable to pre-Covid levels, but much lower than peaks of 3.5% in 1992 and 1.4% in 2009. The current repossession rate also remains very low at less than 0.04%. This compares to the repossession rate of nearly 0.8% in the early 1990s, and still significantly lower than the historical average of around 0.2%. Some of this will be due to the court backlogs following the moratorium on repossessions during the Covid lockdowns, but it would still be very low compared to historical levels. 

Lenders ready to help 

So whilst current arrears levels are still very low in the context of previous trends, lenders are not complacent. They are conscious that every property in arrears is a real worry for the family or individual affected and have worked hard to ensure their teams are accessible and well-trained to provide practical, tailored support to everyone who needs it. But despite the huge investment in tools and teams, a key challenge for lenders is to overcome any barriers that may be preventing struggling borrowers from contacting them in the first place. They are best able to support people who contact them early, before any payments are missed. However, with a recent Citizen’s Advice Bureau Report revealing that over a quarter of people are behind with at least one bill, it’s likely that many struggling mortgage borrowers are burying their heads in the sand rather than seeking support. During these challenging economic times, it is worth lenders continuing to review their customer communications strategies to ensure they reach those people in a way that encourages them to take action.

As we approach the winter months, homeowners already struggling financially will have to factor in the increasing cost of keeping warm. The cut to the energy price cap announced on 1 October 2023, from just over to just under £2k a year on average, will be welcome news, but is unlikely to materially change their overall financial situation. 

Relaxation of the Net Zero housing policies

It was therefore disappointing to see the Prime Minister announce that his government is pulling back on some of the important net zero housing policies, such as scrapping the minimum energy-efficiency standards and extending the deadline for new fossil fuel boilers.  These initiatives would have provided much needed certainty to the market, encouraging greater investment in industries, technologies and skilled labour. The costs associated with these delays will ultimately be borne by consumers, which includes the prolonged higher energy costs as energy efficient home improvements are further delayed. There are also the wider, unseen societal costs of forcing many to live in colder, damper, draughtier homes, as families struggle to balance their earnings with the cost of living. 

Long-term housing strategy 

There are many levers that can and are being pulled to support struggling homeowners. The greatest positive impact is achieved when all stakeholders take action on the things they can influence, which includes a government commitment to developing, communicating and implementing a long-term strategy for the nation’s homeowners. 

This article was first published in Mortgage Finance Gazette