But new mortgage commitments pick up during the same period
The value of outstanding balances with arrears increased by 13% over the quarter and 28.8% over the year to £16.9 billion in the second quarter of this year, the Bank of England (BoE) has reported.
From April to June 2023, new arrears cases equated to 16% of the total outstanding balances with arrears, which was little changed compared to the previous quarter.
By the end Q2 2023, the outstanding value of all residential mortgage loans hit £1.66 trillion – 0.4% higher than the previous year, but the largest decrease on the previous quarter since the BoE began reporting the figures in 2007.
The latest BoE Mortgage Lenders and Administrators Statistics also showed a 32.8% year-on-year fall in the value of gross mortgage advances in Q2 2023 at £52.4 billion, which was also £6.3 billion lower than the previous quarter.
The value of new mortgage commitments – lending agreed to be advanced in the coming months – was 26.2% greater than the previous quarter, but 26.6% less than the previous year, at £61.7 billion.
Meanwhile, brokers sought by news agency Newspage for their reaction to the latest figures expressed concern over the “horrendous and distressing data.”
“The swift escalation in rates was bound to significantly impact default rates, and it’s likely the situation will deteriorate further,” commented Riz Malik, founder and director at R3 Mortgages.
Justin Moy, managing director at EHF Mortgages, said the effect of higher mortgage rates was just starting to reflect heavily in the Bank of England data, with significant increases in arrears, both in pound value and cases.
“The Mortgage Charter does have some benefits for short-term support, but for many this is not enough to ride the high rates and increased cost of payments,” he added. “The government really needs to look to extend this support if the Bank of England are already on record suggesting this will take more time to resolve than first thought.
“Much of this data will have a three- to six-month time lag given the pipeline of applications yet to complete, but these signs are worrying, and the borrowers need intervention quickly.”
However, Mark Harris, chief executive at SPF Private Clients, pointed out there was some positive news in the latest BoE report.
“Encouragingly, new mortgage commitments picked up in Q2 – 26.2% higher than Q1 and the first increase and highest value since the third quarter of 2022, indicating there are still those keen to move who are getting on with it,” he said.
“Even though borrowers are paying more for their mortgages, this is not putting them off as they tighten their belts and absorb the higher cost of borrowing. The good news is that mortgage pricing continues its downwards trend, even though another base rate rise is expected next week.”
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