The Bank of England has released up to date information on mortgage arrears today, and it's not good news. It is also not unexpected, given the struggles faced through COVID and higher interest rates.

The number of mortgages in arrears increased 4.2% in the first quarter of this year compared to Q4 last year. A total of £21bn of mortgage balances are in arrears, the highest number seen since 2014.

The proportion of mortgages in arrears is low, at 1.28%, but it's still high compared to previous years.

The main cause?

The most observed reason for the increase is not a surprise.  Between 2009 and 2022, the highest base rate was 1%; for much of that period, it was 0.5% or lower.

Many borrowers had fixed rates at less than 2% for several years, and when that rate ended, it was pushed up to and above 6% for many. That is a big difference. For example, someone with a £200,000 mortgage paying 2% over 25 years would pay around £848 per month. At 6%, that would be £1,289, resulting in the borrower having to find another £441 each month.

In addition to that factor, many lost jobs during COVID-19 and ended up in debt for several other reasons, which only increased the burden.

What can be done?

Right now the best help borrowers can receive is seeing the interest rates start to come back down.  

There was an expectation that this would start this month when the MPC met to decide on interest rates on June 20th. However, confidence that the BoE would reduce rates this month appears to be falling due to events outside of the UK despite inflation coming down. Time will tell.