Mortgage arrears up for first time since 2016

Mortgage arrears up for first time since 2016

The value of outstanding mortgages with arrears has grown for the first time in two years, statistics from the Bank of England have shown.

The Bank published its Mortgage Lenders and Administrators statistics for the third quarter of 2018 today (December 11), aggregating data from almost 340 mortgage lenders and administrators.

The data found the value of outstanding mortgage balances with arrears had increased for the first time since the second quarter of 2016, reaching £14.5bn and compared with £14.3bn the previous quarter.

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However, the Bank was swift to point out the arrears balance still accounts for only 1 per cent of the total loan balance.

Last week the FCA published its thematic review into long-term mortgage arrears, which found firms generally treated customers in financial difficulty appropriately but "disappointing" inconsistencies existed.

In some cases the regulator identified inconsistent handling of vulnerable customers, for which it is considering further regulatory action against the firms in question.

Mark Pilling, managing director at Spicerhaart Corporate Sales, said with recent rate rises he predicts arrears will begin to increase again, which he fears could be the start of a more permanent shift.

He said: "Consumers racked up a record £17.1bn of credit card debt in October, 11.6 per cent higher than a year earlier, and October is not usually a month associated with big spending. 

"There are growing  concerns that many people are now relying on credit cards for everyday purchases, and while many in this situation are able to keep their heads above water now, if there is another rate rise many people may struggle to make their monthly mortgage payments or rent."

Mr Pilling said this in turn could impact landlords and their ability to make mortgage payments.

The Bank of England's statistics found the share of new buy-to-let lending as gross advances declined to its lowest in six years, reaching 12 per cent in the third quarter of this year.

The share of new lending to first-time buyers in the third quarter remained steady at 21 per cent, coinciding with the extension of the government's Help to Buy scheme announced in the Autumn Budget