Value of mortgages in arrears rises

Michael Lloyd

December 11, 2018

The value of outstanding mortgage balances with some arrears increased for the first time since 2016 Q2, Bank of England’s Mortgage Lenders and Administrators Statistics show.

Mortgage balances in arrears rose to £14.5bn in Q3 2018, up from £14.3bn in Q2 2018. These balances still account for only 1% of the total.

Mark Pilling, Spicerhaart corporate sales managing director, said: “With the recent rate rises, I had predicted we would start to see arrears rise again, and I fear this could be the start of a more permanent shift.

“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, payment shock coming off a fixed rate deal or rise in the cost of living, many people may struggle to make their monthly mortgage payments or rent – which in turn will impact landlords and where appropriate their ability to make mortgage payments.

“Repossession should always be the last resort and lenders should always look to find another option if it is available.

“We can help lenders find solutions that best suit them and their customers, so it is important that lenders start looking at all their borrowers and identify those who are already having difficulties managing their mortgage or are likely to experience future difficulties.”

The outstanding value of all residential mortgage loans continued to increase in Q3 to £1,430bn, 3.2% higher year-on-year, while the share of new lending for buy-to-let declined to 12% in Q3, its lowest since 2012 Q4.

The value of gross mortgage advances grew 3.7% in the year to 2018 Q3, to £73.5bn. This was the highest level since 2007 Q4.

New mortgage commitments (new lending that lenders have agreed to advance in coming months) were 4.7% higher than a year ago.

The share of new lending to first-time buyers remained steady at 21%. Remortgaging, as a proportion of new lending, is 2% higher year-on-year yet it decreased marginally on the quarter to 30%.

The proportion of high loan-to-income lending, loans above four times the value of annual income for a single buyer or above three times the annual income for joint buyers, has increased 1.8% this quarter to 47%.

The share of loans with a loan-to-value ratio exceeding 90% also increased, to 4.3%.

The value of gross mortgage advances grew 3.7% in the year to 2018 Q3, to £73.5bn. This was the highest level since 2007 Q4.

Keith Haggart, managing director at lifetime mortgage provider Responsible Lending, said: “It’s less a case of what’s changed, more a case of what hasn’t. Britons have shrugged off political uncertainty and are borrowing more than at any time since before the financial crisis.

“In fact the growth of new mortgage commitments for the coming months is still vastly outstripping house price growth nationally.

“Favourable borrowing conditions, tax breaks and a desire to buy for the long-term, has blunted the sword of any concerns surrounding Brexit and buyers are still on the march.

“The only thing noticeable by its absence is a jump in the proportion of borrowing by first-time buyers, which doesn’t appear to have shifted since stamp duty tax breaks were introduced. This will only fuel fears the tax break ends up in the pockets of sellers and developers.

“However, first-time buyers are continuing to benefit from the exit from the market of many landlords, which sent buy-to-let borrowing to a five-year low.”

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