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“We’ve yet to hit peak of mortgage debt crisis” – NAPB

11 Feb “We’ve yet to hit peak of mortgage debt crisis” – NAPB

NEW figures that show rising numbers of homeowners are severely behind with their mortgage payments are “deeply alarming”, a leading property group says.

Data released yesterday showed that some 30,010 homeowner mortgages with significant arrears of 10% or more of the outstanding balance were recorded in the fourth quarter of 2021.

This was 350 more cases than the previous quarter and the total has been increasing – albeit from a low base – since early 2020.

Now the National Association of Property Buyers (NAPB) has warned we have “yet to hit the peak” of this problem and they warn the cost of living crisis threatens to “totally destabilise” the housing market.

Jonathan Rolande, from the NAPB, said: “These new figures are deeply alarming and provide the latest example of the devastating impact the cost of living crisis is having on homeowners.

“Until now attention has understandably focused on the rising cost of gas, food and other household bills.

“But mortgage repayments were always likely to be impacted too and now we are really seeing tangible evidence of this with more and more people struggling.

“January and February are always very difficult months anyway because many families are saddled by Christmas debt and struggle to make ends meet.

“So this sudden spike in the cost of living comes at the worst possible time and has created a perfect storm which is only likely to see thousands of people falling further behind on their mortgage repayments in the weeks and months ahead.

“What worries me most is that the planned rise in National Insurance means things could also get a lot worse. Sadly, I fear we have yet to hit anywhere near the peak of this problem.

“And it’s not just homeowners who will be impacted. Those living in rental accommodation are struggling too and we could see increased rates of evictions between now and the end of the year as a result.

“I’ve been warning for many weeks that this cost of living crisis has the potential to totally destabilise the housing market. The boom isn’t over but the market is definitely pausing for breath and the shocking lack of homes coming onto the market is a big problem.

“‘Corrections’ to prices often come from unexpected areas – think of the oil crisis in the 1970s or leaving the ERM in the 90s. The snowball effect on prices that grow can easily happen in reverse too. And once confidence is lost, buyers wait – further eroding confidence. That’s why this current period of crisis will need to be carefully managed by The Bank of England and the Government. Otherwise it could lead to calamity for millions of homeowners.”

In total, 79,620 homeowner mortgages were in arrears of at least 2.5% of the outstanding balance at the end of December 2021 according to UK Finance data.

This was 750 fewer than in the previous quarter, as well as being lower than the same period a year earlier.

Some 26,850 homeowner mortgages were in early arrears of between 2.5% and 5% of the outstanding balance – a figure which was down compared with the previous quarter and the same quarter a year earlier.

These early arrears figures remain substantially lower than the numbers seen before the pandemic, UK Finance said.

Some 6,010 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance in the fourth quarter of 2021 – an increase of 2% compared with the previous quarter and 1% down on the number a year earlier.

And 390 homeowner and 320 buy-to-let properties were repossessed in the final quarter of 2021.

A general ban on repossessions was previously in place during the pandemic – and UK Finance said repossessions will gradually increase as courts work through the backlog.

Eric Leenders, managing director of personal finance at UK Finance, said: “There remains a material backlog of possessions cases, dating back to before the pandemic, which will be resolved through this year. This will see possessions increase gradually through 2022 as this process is managed.

“Looking ahead, rising inflation and planned increases in National Insurance contributions are likely to squeeze household budgets through this year, creating upward pressure on arrears numbers.

“Additionally, any further bank rate rises in response to inflation will lead to increased mortgage payments for some, although the majority of borrowers are currently on fixed rates and will see no increase whilst on these rates.

“Despite these additional pressures, responsible lending rules in place since 2014 ensure that mortgages taken out since then have a built-in affordability buffer to cushion borrowers against shocks to income and payments, which will moderate the extent of increases in arrears.

“Lenders continue to provide tailored forbearance and support to borrowers who need help and, as always, we encourage anyone experiencing financial difficulty to contact their finance provider as soon as possible to discuss options available.”