The report noted that there are no early signs of problems in unsecured borrowing even though the coronavirus job retention scheme ended in the close of the third quarter, with the mortgage payment deferral scheme having concluded fully two months before that.
“Although reportable arrears take some time to build up, it is encouraging that, following the end of this support, there was no immediate increase in borrowers unable to meet their monthly mortgage payments, having held arrears at bay with the help of that temporary support from industry and government,” UK Finance said.
Read more: UK Finance: Mortgage arrears remain low as payment holidays come to an end.
However, the trade body warned that payments are likely to come under greater pressure through 2022 as the cost-of-living squeeze weighs more heavily.
“While households look to be in a good position regarding payments now, we expect some increase in arrears through the year as the rising cost of living starts to bite,” Lee Hopley, director of economic insight and research at UK Finance, said.
The trade body said that as inflation continues to outstrip wage growth through this year, and additional National Insurance contributions kick in from April, real disposable household incomes will be increasingly squeezed.
UK Finance also said that while there is a downward trend for overall arrears figures, the number of people who are in deeper arrears – those who already had significant payment shortfalls before the pandemic struck – continues to increase.
This increasing stock of heavy arrears cases will gradually ease over the course of 2022 into 2023 as the backlog of delayed possessions is cleared, the report concluded.
