Bank of England issues mortgage warning with significant rise in arrears

Cut up credit cards on final notice warnings
-Credit: (Image: Getty)

More homeowners are behind on their mortgages than anytime in the last seven years as the Bank of England's latest data reveals the devastating consequences of the last few years. Combined with the financial strain of the pandemic still lingering and the staggering cost of living rises, more and more people are struggling to make ends meet for essentials let alone debts.

The report covering the first quarter of 2024 revealed mortgage balances with arrears increased by 4.2 percent compared to the previous quarter, holding a monetary value of £21.3billion. This is also a jaw-dropping 44.5 percent increase from a year earlier.

Additionally, the proportion of total loan balances with arrears relative to all outstanding balances increased from the last quarter from 1.23 percent to 1.28 percent. This is now at the highest level since the final quarter of 2016. Sign up for the North Wales Live newsletter sent twice daily to your inbox

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On a more optimistic note, the report also revealed that the outstanding value of all residential mortgage loans decreased by 0.1 percent from the previous quarter. This saw it falling 1.4 percent compared to a year ago with the total monetary value of outstanding mortgages currently sitting at £1,654.9 billion.

A borrower falls into mortgage arrears when they miss their mortgage payments, which is also recorded on their credit file. Missing multiple payments can result in the property being repossessed but there is help available for those struggling to stay ahead of their debts, reports Bristol Live.

Money Saving Expert has reassured Brits that mortgage lenders typically view repossession as a "last resort", and would much rather see borrowers repay their debts. It's worth noting that major lenders won't repossess a home until at least 12 months after the first missed payment, and only if the borrower shows no signs of addressing their financial difficulties.

When a home is repossessed, lenders usually put the property up for auction to secure a quick sale. However, if the auction price doesn't cover the outstanding mortgage, borrowers may still be pursued by the lender to recover the remaining debt.

For this reason, Money Saving Expert advises homeowners to consider selling the property themselves if time allows, as this could potentially fetch a higher price. This approach also prevents a repossession being registered against the borrower, which could impact their ability to secure future mortgages.

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