Value of mortgage balances with arrears rises by 28.8%
Strong wage growth could help to slow home repossession rates, experts said.
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Your support makes all the difference.The value of outstanding mortgage balances with arrears jumped by 28.8% annually in the second quarter of this year, according to Bank of England figures.
At £16.9 billion, this was also a 13.0% increase compared with the previous quarter, the mortgage lenders and administrators statistics showed.
This now accounts for 1.02% of outstanding mortgage balances.
The figures were released on the same day the Office for National Statistics said average regular weekly earnings growth remained at 7.8% in the three months to July, the highest since comparable records began in 2001.
Simon Gammon, managing partner at Knight Frank Finance, said that despite the “sizable jump” in arrears, “the proportion of outstanding mortgage balances in arrears remains low at just 1%”.
We are more likely to see arrears in the buy-to-let sector, where landlords face a unique set of challenges
“That’s because the vast majority of outstanding mortgages were issued under the post-global financial crisis regime, which was much more stringent when it comes to affordability,” he added.
“While mortgage payments at today’s rates are painful and require borrowers to cut their discretionary spending, they are still technically affordable. That’s going to keep arrears low despite steep increases in mortgage rates.
“We are more likely to see arrears in the buy-to-let sector, where landlords face a unique set of challenges. If a landlord finds their mortgage is no longer affordable, or the rent no longer covers their outgoings, they only have two choices – sell or default.”
Riz Malik, director of Southend-on-Sea-based broker R3 Mortgages, told website and news agency Newspage: “The swift escalation in rates was bound to significantly impact default rates, and it’s likely the situation will deteriorate further.”
Myron Jobson, senior personal finance analyst at interactive investor, said: “While higher monthly repayments could lead to a rise in mortgage arrears the record-breaking wage growth run and relatively low level of unemployment could slow the rise in repossessions.”