Mortgages in arrears hit a near eight-year high in the first quarter of this year, according to data from the Bank of England and Financial Conduct Authority.
According to the data, the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased from 1.23 per cent to 1.28 per cent in the first quarter of 2024, the highest since 2016 Q4.
The value of outstanding mortgage balances with arrears increased by 4.2 per cent from the previous quarter, to £21.3bn, and was 44.5 per cent higher than a year earlier.
Abigail Fernandes, analyst at Pepper Advantage, said: “The Bank’s latest report would appear to complement our recent findings that mortgage arrears growth is slowing to its lowest rate since September 2022’s mini-Budget and the mortgage market is showing some signs of improvement, with new commitments up significantly.
“However, the state of the housing and mortgage markets is not the same across the whole of the UK, with disparity between regions. We found that the arrears growth rate increased during Q1 for both the North East and North West regions while it decreased in other areas, including the South East and Greater London.
“Even with green shoots appearing, the economic picture remains complex, and certain groups remain under pressure and will likely require support for some time.”
Elsewhere, the value of new mortgage commitments increased by 30.8 per cent in the first quarter of the year.
The data found that £60.1bn worth of new commitments, lending agreed to be advanced in the coming months, had been agreed between January and March 2024.
This represented quite a significant increase compared with the last quarter of 2023 which saw nearly £46bn worth of commitments being agreed.
This also represented an increase on a yearly basis, being higher than the £45.8bn of commitments recorded in the first quarter of 2023.
The FCA additionally detailed that the last time when commitments were as high was in Q3 2022 when they totaled £87.8bn.
Of these new commitments, 61.7 per cent were for the purchase of a new house, while 34.3 per cent were for remortgaging.
This was in line with previous findings as, in the last quarter of 2023, 60.9 per cent of loans were for purchasing houses while 34.6 per cent were used for remortgaging.
Gross advances
The data also revealed that the total worth of gross advances had fallen in the first quarter of the year, decreasing by 12 per cent when compared to the previous year.
It detailed that gross advancements in Q1 2024 were worth £51.6bn, a fall on the £58.6bn that was recorded in the first quarter of 2023.
This was also a quarterly fall as gross advancements decreased from £52.9bn in the last quarter of 2023.
The FCA added that last quarter’s gross advancements was the lowest since the second quarter of 2022.
Additionally, the data provided insight into the purpose of loans as per cent of gross advancements, discovering a heavy preference in favour of house purchasing.
