The number of mortgages in arrears grew by 3.9 per cent between January and March of this year when compared with the last quarter of 2023, data from Pepper Advantage has revealed.
The data, which examined mortgages in Pepper Advantage’s UK portfolio, pointed out this was a decrease from previous growth rates which stood at 5.7 per cent in Q4 2023 and 7 per cent in Q3 2023.
The slowing growth rate indicates improved resilience for some segments of the UK market as higher-than-expected wage growth and lower headline inflation lead to a rise in real incomes.
However, despite this slowed growth, Q1 represents yet another post-financial crisis high.
Pepper Advantage UK managing director, Aaron Milburn, described this slowing growth as “welcome news for lenders and borrowers”.
However, he cautioned that “the picture remains complex”, and that the overall level of arrears “is still the highest since the 2008 financial crisis”.
“The slowing growth suggests an increasingly resilient UK economy as lower inflation and higher-than-expected wage increases alleviate pressure on household budgets in some areas.”
Regional disparity
Pepper Advantage found that every region in the UK saw slowing growth in the arrears rate except the North East and North West of England.
The West Midlands and East Anglia stood out with the lowest arrears rate of only 0.4 per cent and 0.5 per cent respectively.
“The disparity seen between regions and age groups shows that financial challenges are not evenly spread,” Milburn added.
“The Q1 data contains some hopeful indicators, but it is too soon to say if these trends will continue into Q2.
“Managers and lenders must be cognisant that some groups remain under pressure and will likely require support for some time.”
Buy-to-let mortgages also saw small growth in the arrears rate, growing 0.2 percentage points in Q1 2024 compared to the last quarter of 2023.
This figure is consistent over the last three quarters.
The overall arrears rate for BTL mortgages remains low, but the slow yet steady increase demonstrates the challenging environment faced by landlords and renters in many parts of the UK.
tom.dunstan@ft.com
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