"Higher payments are creating a greater burden for many"
Mortgage arrears increased for the first time since the first quarter of 2021, while new mortgage commitments fell by a third in Q4 2022, the Bank of England’s (BoE) Mortgage Lenders and Administrators Statistics for Q4 2022 have shown.
From October to December 2022, the value of outstanding balances with arrears increased by 4.6% to £13.6 billion. Annual growth was 1.3%.
This now accounts for 0.81% of outstanding mortgage balances, but remains close to the historical low of 0.78% recorded in the third quarter of 2022.
The outstanding value of all residential mortgage loans was £1.68 trillion at the end of Q4 2022, which was 3.9% higher than a year earlier. The value of gross mortgage advances was £81.6 billion in the final quarter of 2022, which was £4.3 billion lower than the previous quarter, but 16.3% higher than in Q4 2021.
The BoE report , published on Tuesday, also revealed that the value of new mortgage commitments, or lending agreed to be advanced in the coming months, in Q4 2022 was 33.5% less than the previous quarter and 24.5% less than a year earlier, at £58.4 billion.
Simon Webb, managing director of capital markets and finance at later life lender LiveMore, said this downturn was a consequence of rising interest rates, as well as uncertainty in the economy and housing market, low consumer confidence, high inflation, and the rising cost of living.
“While mortgage rates have reduced since the peak of early 2023, much uncertainty remains in the market,” Webb pointed out. “Some lenders are reducing rates, other are increasing and swap markets continue to be volatile.
“The failure of Silicon Valley Bank and its associated impacts is also starting to flow through to markets and adding to uncertainty and driving volatility. For mortgage lending to rise to previous levels, stability in the market needs to return.”
Andrew Gething, managing director at support services provider MorganAsh, also noted that while there were signs that inflationary pressures were beginning to ease, the news of an increase in mortgage arrears showed that for many, the higher mortgage payments were creating a greater burden.
“When you also consider an increase of mortgages with loan-to-value ratios exceeding 90%, the number of active borrowers who may now be in a financially vulnerable position is concerning,” Gething said.
“What we don’t know is the compounding impact of those with consumers with health or lifestyle vulnerabilities, who typically suffer more. This is a key reason why the new Consumer Duty regulation has been introduced, to ensure financial services not only better identifies, but protects the most vulnerable for the long term.
“Many advisers and brokers will say looking after vulnerable consumers has been a priority all their professional life. This is undoubtedly true – but Consumer Duty has increased the scope of vulnerabilities we need to consider, the evidence we need to keep, and the actions we need to take. We are no longer just concerned with financial vulnerabilities, but all potential issues including health and lifestyle, domestic abuse, and divorce to name just a few.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter.
