October Money Stats – Mortgage arrears on the rise again

Today the UK’s leading financial capability charity The Money Charity releases The Money Statistics, giving an overview of the financial situation facing people in the UK.

The Money Stats are out today and figures show that after years of steady falls, cases of mortgage arrears have risen for the second quarter in a row.

According to the Financial Conduct Authority, at the end of Q2 2016 there were 218,279 mortgage loan accounts with arrears of more than 1.5% of the current loan balance. This is 5% up on the previous quarter and 14% up on the low at the end of 2015.

From a high of nearly 400,000 residential loans to individuals having arrears greater than 1.5% of the total amount owed in early 2009, this number had more than halved, falling in almost every quarter through to the end of last year.

The average mortgage interest rate was just 2.84% in August. This low rate, together with a recovering economy has helped bring about the fall, but this year seems to no longer be having the same effect.

Fortunately, this has not yet fed through to an increase in mortgage possession claims. These are 9% down on a year ago and have fallen from a high of more than 20,000 per quarter in 2009 to fewer than 5,000 in spring 2016.

October MS Press graphSource: Financial Conduct Authority

Michelle Highman, Chief Executive of The Money Charity says:

“Mortgage interest rates have been extremely low in the last few years, and have been part of what has allowed more people to pay off and avoid arrears.

People’s houses are in most cases by far the largest assets they have. We at The Money Charity are glad that these growing arrears have not yet resulted in more people leaving their homes. But with the government recently signalling that rates will have to rise, households with tracker mortgages in particular may have to budget for much larger repayments.

Both individuals and the government should be prepared for more mortgage arrears and difficult times ahead.”

Other key points from August’s Money Statistics include:

  • The population of the UK grew by an estimated 1,286 people a day between 2014 and 2015.
  • The Bank of England Base Rate is currently set at 0.25% (since being established in 1694, the Rate has never been lower).
  • People in the UK owed £1.499 trillion at the end of August 2016. This is up from £1.445 trillion at the end of August 2015 – an extra £995.43 per UK adult.

Get the full picture, and many more fascinating facts about money in the UK in our monthly Money Statistics.