The value of residential mortgages written off by banks and building societies has increased by 58% in the last year, jumping from £77 million to £122 million in the year to 30 June  2018 according to new analysis by Moore Stephens.

Moore Stephens says the increase could be an early sign of distress in the UK housing market. It is the first rise in write-offs since 2013/14. In recent months, house price growth has stalled across the UK with house prices actually falling across two-thirds of London.

This year’s increase in mortgage write-offs comes after a steady downward trend in the value of mortgage write-offs over the last decade. In 2009, UK banks were forced to write-off £984 million against residential mortgages.

It is now over a year since the Bank of England started hiking interest rates from their historic low of 0.25%, trebling to the current 0.75%. The rate rise will have already impacted floating-rate mortgages and tracker mortgages.

Although interest rates are increasing from a very low base, they will have caught out homeowners who were already struggling with their finances.

Data from the Insolvency Service show a 10% rise in the number of individuals going bankrupt last year, increasing to 106,570 in the year to 30 September  2018 up from 96,940 in the previous 12 months.

Jeremy Willmont, Head of Restructuring & insolvency at Moore Stephens said “The interest rate cycle has turned. The unfortunate collateral damage of interest rate rises is more financial pain amongst mortgage holders and more personal insolvency.”

“Increasing mortgage write-offs could suggest the economy is beginning to display signs of slowing down. The run of good luck that the economy has had since the Brexit vote looks like it could be coming to an end. We may see the number of write-offs rise in the coming months as a result.

“Whatever type of Brexit we end up with, concerns have been raised about the potential impact on the economy. We could see more unemployment and more mortgage repossessions, and the Bank of England has said that a soft Brexit is likely to be followed by more interest rate rises. So far the UK housing market has remained relatively stable and that has kept the actual amounts mortgage lenders have written off relatively low as the security for these mortgages has held up.”

*Bank of England data, table

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