Nearly 1 in 3 UK Residents Miss Mortgage Payments

Nearly 1 in 3 UK Residents Miss Payments as Mortgage Arrears Soar by 50% Amidst Rising Interest Rates

UK government's Mortgage Charter has helped over 1.1 million mortgage holders in recent months

By Niloy Chakrabarti Niloy Chakrabarti Published 08/27/24 IBT

The UK Department for Work and Pensions-backed Money and Pensions Services (MaPS) October 2023 survey of UK residents revealed that 30% had missed at least one payment during the year, with many experiencing the setback for the first time. The research showed missed payments were led by credit card and utility defaults, but more people are also beginning to miss rent and mortgage payments.

Elevated interest rates and the end of fixed-rate mortgage deals for almost 1.6 million UK homeowners this year could increase mortgage payments by an average of £1,800 annually as they transition to higher rates. The situation puts nearly a quarter of UK mortgage holders at heightened risk of missing payments as thousands remain worried about losing their homes.

Massive Surge In Repossession Claims Cases

UK Ministry of Justice data shows that mortgage repossession claims in England and Wales reached 5,182 for Q1 2024, a 40% jump in 18 months. Meanwhile, recent Bank of England (BoE) data revealed mortgage balances with arrears jumped over 50% in Q4 2023 compared to 2022 to reach £20.3 billion. Furthermore, Hargreaves Lansdown analysts estimated that mortgage payments will grow to account for a quarter of annual income for millions of homeowners when fixed-rate deals end by 2024-end. A total of 2.1 million mortgage holder could witness mortgage payments surpass 25% of their disposable income, which amplifies default risks. The experts further calculated that close to 400,000 households with insufficient savings and inadequate spending habits could be a "critical risk" of slipping into arrears.

UK Ministry of Justice data shows that mortgage repossession claims in England and Wales reached 5,182 for Q1 2024, a 40% jump in 18 months

Government Ramps Up Measures To Help Mortgage Holders

The UK government recently rolled out the Mortgage Charter to stop banks from proceeding in repossession cases after initial non-payment. It clearly states that borrowers won't face eviction without consent within a year of their first mortgage default. The charter pushes lenders to help borrowers navigate rising living costs. Homebuyers can seek help from lenders without impacting their credit scores, and they have the option to temporarily defer payments or switch to interest-only payments to reduce the load on monthly household budgets. The Financial Conduct Authority estimated that over 1 million mortgage holders have benefitted from the charter, which has the backing of 90% of the mortgage market.

Pleas For Assistance From Charities Have Tripled

Charities think the number of people asking them for financial assistance has tripled since interest rates started climbing in 2022. Money Advice Trust's Jane Tully described the current landscape of elevated living costs as challenging times for mortgage holders. The trust runs the free debt advice service through National Debtline. Tully also highlighted the financial risks homeowners face when their fixed-rate deals end to significantly increase monthly repayments, adding that more mortgage holders are contacting National Debt.

MaPS urges financially vulnerable people, especially those about to miss payments, to act by contacting charities or negotiating better rates or flexible payment options with their creditors. MaPS head of guidance Charlotte Jackson shared a surprising estimate that one in seven people wouldn't take action if they were struggling financially, which increases their risks to financial stability by many folds over the long term. Meanwhile, defaulters can seek free debt advice to have some control over the situation⍐.