The majority of mortgaged households should be able to continue meeting their mortgage payments amid the various cost-of-living issues currently being experienced, says UK Finance.

The trade body’s quarterly report on household finances says that, so far, the three recent rate increases enacted by the Bank of England, which have fuelled weekly mortgage rate hikes, have not yet caused any “increased incidence of payment stress for mortgage payments” with the approximately 2 million homeowners on a variable rate mortgage.

The report details that the number of borrowers in arrears has dipped in fact, from 85,610 at the close of last year to 81,480 at the end of Q2 2022.

And the fall in arrears has occurred in every category – “from early arrears all the way through to those cases with the deepest arrears positions”, UK Finance says.

Heavy arrears cases – those over 10% of the outstanding mortgage balance – have fallen by 650 cases to 31,070, the first quarterly decrease since the end of 2019. “This first fall in heavy arrears may be an early indication that the backlog of possession cases, most of which will be in these heavy arrears bands, is finally started to clear,” states the report.

UK Finance says that the combined pressure of higher inflation and tax changes is set to lower the amount of disposable income available to households by 3% during 2022 compared to 2021.

While the body believes that, “given the significant amounts of room after all payments that most mortgage borrowers have in their budgets,” in part thanks to the strict stress tests for affordability calculations lenders carry out, will help weather this storm, lower income households will be more exposed.

“Therefore, we expect these pressures to lead to gradually increasing arrears numbers, with households on lower incomes disproportionately featuring in this.”