Credit, Collections & Insolvency News
Latest figures from UK Finance have predicted that mortgage arrears as set to rise in 2024.
The research also found that there has been an estimated 4,400 repossessions in 2023, noting that this was ‘an incredibly low number by historic comparisons.; It also highlighted that over 99% of the 10.8 million mortgages in the UK are not in arrears, due to strict affordability tests and low unemployment.
In a report, UK Finance said higher interest rates and household costs would make it harder for people to access mortgage credit, which is based on affordability.
It predicted this trend would also lead to falls across all lending next year and a higher number of repossessions. These challenges led to some homeowners finding themselves behind in their mortgage payments, accruing arrears.
Mortgage arrears are forecast to rise from 105,600 cases by the end of 2023 with arrears of over 2.5% of the outstanding balance, to 128,800 by the end of 2024.
Historically, the main cause of mortgage arrears has been unemployment, which is currently at low levels. The unemployment rate was 4.2% between July and September, according to the Office for National Statistics, with the latest figures due to be published on Tuesday.
Whilst arrears will continue to rise next year, UK Finance says that is doesn’t anticipate a commensurate increase in mortgage possessions. There were an estimated 4,400 possessions through 2023, an incredibly low number by historic comparisons, excluding the artificially suppressed numbers through 2020 and 2021 during the pandemic. Next year we expect only a small increase to 5,100, with this activity still relating to historic cases, most of which pre-date the pandemic. With a continuing favourable labour market, extensive lender forbearance and gradually improving affordability, the vast majority of customers now falling behind will eventually recover their positions. The very small minority of cases where this is not possible will not feed through into any material increase in possessions over our forecast period.
Katie Pender, Managing Director of Target, said “While it’s worrying that the forecasts predict that mortgage lending will fall across the board in 2024, there’s some light at the end of the tunnel in that pressures on affordability look like they are peaking. In addition, although possessions are expected to increase next year, they would still be lower than in any year from 2019 all the way back to 1981. It will be interesting to see too whether borrowers will start to feel more confident now that mortgage interest rates are falling.”
“With a General Election likely next year though, borrowers will need to feel confident in the stability of the market after what has been a rocky period. To support both them and lenders, we must, as an industry, work hard to provide a service based on fast and reliable technology systems which put the customer first. This would then take us into 2025 on a good footing, when the forecasts predict that things are expected to begin to look up.”
