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UK lenders fear spike in mortgage defaults

Britain’s mortgage lenders fear a rise in the number of homeowners handing back their keys as the cost of living crisis forces more people to default on their loans.

The Bank of England said a survey of lenders showed they were braced for a steep rise in the number of customers who cannot pay their monthly mortgage bills during the first quarter of the year.

The survey found that the number of people defaulting on credit cards and unsecured credit loans increased in the fourth quarter of 2022 and would climb further this year.

Anti-poverty campaigners have said rocketing mortgage interest rates and double-digit inflation means many low and middle-income families will likely find their loans unaffordable.

The Resolution Foundation thinktank said earlier this month that the average mortgage payer re-financing their loan faced an extra £3,000 a year in higher interest charges after nine increases in the Bank of England base rate since December 2022.

Households also face the extra costs of food and energy that have pushed the annual UK inflation headline rate to 10.5%, well above the Bank of England’s 2% target.

Buyers looking to get a first foot on the housing ladder or to move home were also likely to face a tougher time finding a home and a mortgage.

The most recent mortgage data collected by the central bank showed house purchase activity continued to slow late last year, with the number of mortgages approved for home sales falling to 46,100 in November, down from 59,000 in October.

This slump brought the level of sales to its lowest level since January 2011 if the collapse in June 2020 to 40,500 during the first Covid-19 lockdown is stripped out.

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