Mortgage arrears jumped by almost a quarter in the three months to September, hitting a post-financial crisis high, data from Pepper Advantage shows.
Residential home loans in arrears lifted to 23.3% in the third quarter compared to a year ago, says the global credit intelligence company, after studying data from its portfolio of over 100,000 UK mortgages. The highest rate since the 2007/2008 global financial crisis.
The firm says the rise follows successive increases in the percentage of mortgages that experienced a direct debit rejection, where a direct debit instruction is processed by a creditor, but there are insufficient funds in the borrower’s account.
Third-quarter direct debit rejections grew 19.3% year-on-year, although this is a smaller increase than the 33.3% annual figure posted in April.
The credit firm says its findings tally with the Bank of England’s latest Credit Conditions Survey earlier this month, which reported that lenders said that defaults on secured loans to households rose in the third quarter.
It found that the default rate on secured loans to households posted a net balance of 43.3 in the three months to the end of August, up from 30.9 in the previous quarter, according to the central bank’s questionnaire of lenders.
Lenders also expected this rate to increase in the final quarter of this year.
Pepper Advantage adds that it also” expects macroeconomic pressure on borrowers to continue to impact arrears in the fourth quarter and into next year”.
It points out that pressure on households comes from a combination of “unpaid essential bills, depleted savings and an increasing proportion of disposable income spent on mortgage repayments”.
Pepper Advantage UK chief executive Gerry McHugh says: “We are supporting customers during this difficult time as the increasing cost of living, reduced household savings and rising interest rates combine to put pressure on borrowers.
“Unfortunately, we expect the situation to get worse before it gets better.
“Our real-time credit intelligence gives us and our clients the information to provide appropriate support to the borrowers who need it, including measures such as interest rate reductions or extending mortgage term lengths.”
