Arrears on mortgages nearly doubled in the first quarter of 2024 according to the latest Bank of England data. The value of outstanding mortgage balances with arrears increased by 44.5% compared to the same time last year. Outstanding arrears now stand at £21.3 billion representing an increase of 4.2% from the previous quarter. In addition, 1.28% of all outstanding mortgage balances are now in arrears which is the highest figure since the last quarter of 2016.
That being said, new arrears cases have decreased by 2% from the previous quarter representing just 11.4% of the total outstanding balances with arrears. This is the lowest figure since 2022. This means that while mortgage arrears have nearly doubled, there are fewer new cases overall. This suggests that the high figure is largely due to older debt rather than a recent uptick.
What is causing the surge in mortgage arrears?
The cost of living crisis in combination with high mortgage rates are likely to blame for the surge in arrears over the last 12 months. For context, according to Moneyfacts data, the average two-year fixed rate mortgage rate was 5.93% at the start of June 2024, while it was just 3.25% in June 2022. People who are already struggling as a result of record inflation and the ongoing cost of living crisis are now finding it hard to cope with significantly higher-rate mortgage repayments.
Not keeping up with your mortgage payments could eventually lead to your home being repossessed if your lender has exhausted all other means to assist you. And, given the surge in mortgage arrears, it's perhaps unsurprising that home repossessions are also up year on year according to the latest statistics.
Home repossessions are up by 4%
Between January and March 2024, a total of 759 homes were repossessed in England and Wales representing a 4% increase when compared to the same time last year. Meanwhile, mortgage possession claims were up by 28% over the same year with a total of 5,182 claims submitted. The mortgage possession claim is the first step in the formal repossession process.
Mortgage possession warrants were up by 9% too, with 2,881 issued between January and March 2024. For context, some mortgage possession orders give lenders the right to repossess the property (usually within 28 days), while others, which are referred to as suspended possession orders, give the homeowner the right to remain in the property as long as they stick to certain conditions and repay their arrears.
Missing a mortgage payment will not automatically lead to your home being repossessed. Your lender is obliged to take reasonable steps to help you repay your mortgage. Read on to find out what to do if you're worried about falling into arrears.
What to do if you fall into mortgage arrears
If you're facing mortgage arrears right now then the figures above should demonstrate that you're not alone. Being in arrears doesn't necessarily mean that you will lose your home, and there are steps you can take to alleviate the situation.
Your lender could help you if you're struggling with your mortgage payments by:
- Extending the term of your mortgage so that your overall monthly payments are lower
- Switching your mortgage to an interest-only mortgage so you don't pay off the capital but just the interest
- Giving you a short-term mortgage holiday to help if your financial difficulties are temporary
It's important to remember that even if one of these options is open to you in the short term, this could result in higher monthly payments down the road or paying more in interest as the debt accrues. As such, these solutions might not be appropriate in all cases, but you won't know unless you speak to your lender to discuss your options.
The key thing to remember is to keep the lines of communication open. The sooner you speak to your mortgage provider, the sooner they can find ways to help you. We delve into this topic in more detail in our article on dealing with mortgage arrears.
In short, whatever your circumstances, there are likely to be steps you can take to help alleviate some of the financial pressures brought on by high interest rates and the cost of living crisis.
What to do if your mortgage is due for renewal
If your fixed-rate mortgage is due to end soon and you're starting to think about the implications of renewing, there are resources to help you decide the best course of action for you. In our article on remortgaging in 2024, we discuss whether now's the right time to fix your mortgage and if so, how long you should fix for.
If you decide you want to remortgage, we cover the process and costs involved in our guide to remortgaging. Finally, you could check out our best remortgage deals to see whether any of the fixed-rate or tracker mortgages may work for you and your circumstances. Typically, the lower your loan-to-value ratio, i.e. the more of your home that you own, the better the interest rate will be.
