Bank of England issues urgent warning to anyone with a mortgage

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Mortgage balances in arrears rose by 4.2 per cent compared to the previous quarter

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Temi Laleye

By Temi Laleye


Published: 16/06/2024

- 11:37

Mortgage balances in arrears rose by 4.2 per cent compared to the previous quarter, as more people struggle to keep up with the cost of living crisis

More homeowners are behind on their mortgages than anytime in the last seven year, according to the Bank of England's latest data report.

The financial squeeze left from the pandemic and rising cost of living have left many struggling to cover basic expenses, let alone repay debts.


The bank's report for Q1, 2024 showed that mortgage balances in arrears rose by 4.2 per cent compared to the previous quarter, totalling a staggering £21.3billion.

This is also a staggering 44.5 percent increase from a year earlier.

Additionally, the proportion of total loan balances with arrears relative to all outstanding balances increased from the last quarter from 1.23 per cent to 1.28 per cent.

This is now at the highest level since the final quarter of 2016.

Mortgage document

A borrower falls into mortgage arrears when they miss their mortgage payments, which is also recorded on their credit file

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On the other hand, the outstanding value of all residential mortgage loans fell by 0.1 per cent from the previous quarter, marking a 1.4 per cent decrease compared to a year ago.

This saw it falling 1.4 per cent compared to a year ago with the total monetary value of outstanding mortgages currently sitting at £1,654.9bn.

A borrower falls into mortgage arrears when they miss their mortgage payments, which is also recorded on their credit file.

Missing multiple payments can result in the property being repossessed but there is help available for those struggling to stay ahead of their debts.

MoneySavingExpert.com has reassured Britons that mortgage lenders typically view repossession as a "last resort", and would much rather see borrowers repay their debts.

It's worth noting that major lenders won't repossess a home until at least 12 months after the first missed payment, and only if the borrower shows no signs of addressing their financial difficulties.

Arrears are still low compared with their all-time high of 3.64 per cent in the first quarter of 2009, during the global financial crisis.

But more households are set to face higher mortgage costs this year as fixed deals agreed two or five years ago expire.

New research from Moneyfacts Compare suggests those who are coming to the end of a five-year fix this month can expect to see the interest they pay almost double, with average rates rising from 2.85 per cent then to 5.5 per cent now.

The proportion of all mortgages that are in arrears increased from 1.23 per cent in the final three months of 2023 to 1.28 per cent in the first three months of 2024, which was the highest level since the end of 2016.

On a mortgage with a £175,000 balance outstanding and 20 years left on the term, that would mean the difference between paying £957 and £1,204 each month.

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If they stayed on the same rate for the rest of the mortgage term, the total amount of interest they paid back would swell from £54,790 to £113,913.

On two-year fixes, the change has been even more drastic. The average rate moved from 1.99 per cent in July 2020 to 6.85 per cent three years later as base rate increases and the mini-Budget sent interest soaring.

James Hyde, of Moneyfacts Compare, said: "Mortgage rates may have fallen significantly since peaking last year, but they remain much higher than they've typically been over the past 14 years.

"For example, those who are coming to the end of a five-year fix in June 2024 can expect to see their interest payments almost double.

"If they wish to fix for a shorter term to keep their future options open, rates will be even higher: the average two-year is currently close to six per cent."

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