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UK ‘mortgage meltdown’ looms amid ‘terrifying’ growth in arrears

Mortgage arrears jumped by 13% in the second quarter of the year to the highest level since 2016, according to Bank of England figures that underscore the stress in the UK mortgage market.

Rising interest rates and unemployment over recent months have put pressure on household disposable incomes, forcing some families to cut or suspend their monthly mortgage payments.

Buy-to-let mortgage payers have also come under pressure in parts of the country where tenants struggle with the cost of living crisis.

The Bank of England said the total value of mortgage balances which had some arrears rose to £16.9bn, up by 29% on the previous year and the highest since the third quarter of 2016.

Mortgage arrears are based on figures showing the number of borrowers failing to make payments equivalent to at least 1.5% of the outstanding mortgage balance or where the property is in possession.

Mortgage lending was also hit in the second quarter with gross advances falling by £6.3bn to £52.4bn. Year on year, mortgage lending slumped by almost a third, to the lowest level since the worst of the Covid-19 collapse in lending in the second quarter of 2020.

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, told the news agency Newspage a “mortgage meltdown” is approaching unless the Bank of England changes its approach.

Shaw said: “The speed at which mortgage arrears are increasing is terrifying and should give cause to pause at the next Bank of England interest rate meeting. This is dire data, and we know that it’s about to get a lot worse with 1.6m mortgage holders due to renew over the next 12 months at significantly higher rates than anyone has been used to for over a decade.”

Simon Gammon, managing partner at the finance arm of estate agents Knight Frank, said the proportion of mortgage payers falling behind with payments remained low at just 1% despite the “sizeable jump in arrears”.

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