UK mortgages in arrears hit highest level since 2016

(Sharecast News) - The share of outstanding UK mortgages in arrears rose to its highest level in nearly eight years in the first quarter of 2024, according to statistics released on Tuesday by the Bank of England, as elevated borrowing costs took their toll on household finances. The value of outstanding balances with arrears was up 4.2% over the first three months of the year at £21.3bn, 44.5% higher than the first quarter of 2023, the central bank said.

The proportion of loan balances with arrears relative to outstanding mortgage balances increased to 1.28% from 1.23% at the start of the period, coming in at the highest level since the fourth quarter of 2016.

Interest rates on mortgages have surged over the past three years to coincide with the BoE hiking the Bank Rate to a 16-year high of 5.25% in the face of soaring inflation.

The BoE's findings were accompanied by data showing the outstanding value of all residential mortgage loans was broadly flat (-0.1%) over the quarter at £1.65trn, down just 1.4% on last year.

However, the value of new mortgage commitments - lending agreed to be advanced in the coming months - jumped by 30.8% to £60.1bn, up 31.2% year-on-year.

Meanwhile, the proportion of lending to borrowers with a high loan-to-income ratio fell by 3.0 percentage points to 39.7% - its lower level since the first quarter of 2016.