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The proportion of mortgage balances in arrears increased to the highest level in six years in the third quarter of this year.

The Bank of England said the proportion of the total loan balances with arrears, relative to all outstanding mortgage balances, increased on the quarter from 1.02% to 1.14% – the highest level since the second quarter of 2017.

According to the Mortgage Lenders and Administrators statistics, the value of outstanding mortgage balances with arrears increased by 11.4% from the previous quarter to £18.8 billion. This was 44.0% higher than a year earlier.

The value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 16.5% from the previous quarter to £51.5 billion and was 41.4% lower than a year earlier.

Many lenders have signed up to a Mortgage Charter, offering various options for homeowners struggling to keep up repayments.

Given the predominance of fixed rates in the market, the squeeze on our finances caused by sharply higher rates isn’t going to come as a short, sharp shock, but as a nasty squeeze on a small section of the mortgage market each month

Sarah Coles, Hargreaves Lansdown

Lenders have been encouraging struggling borrowers to get in touch and have said they stand ready to help.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Arrears have reared their ugly heads, with total mortgage arrears up over 10% in a quarter and rising by almost half in a year. As a proportion of the total amount lent in mortgages, it hasn’t been this high since the middle of 2017.”

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She added: “The pain is far from over. Given the predominance of fixed rates in the market, the squeeze on our finances caused by sharply higher rates isn’t going to come as a short, sharp shock, but as a nasty squeeze on a small section of the mortgage market each month, over a horribly prolonged period of time. With so many people moving from a fixed rate of less than 2% to around 6%, it’s no surprise that so many are hitting a brick wall financially.

“If you’re struggling to make payments, it’s tempting to put your head in the sand, but the sooner you face the problem, the easier it will be to tackle. Your mortgage company has an obligation to offer help – which can mean anything from a payment holiday, to stretching your mortgage over a longer period to make the monthly payments more affordable, or temporarily switching to an interest-only deal. So if you feel there’s nowhere to turn, it’s worth getting in touch and asking for help.”

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Falling into mortgage arrears, or failing to make timely payments, can have a more significant financial impact on those with larger mortgages. The higher monthly obligation makes it challenging to catch up on missed payments, leading to increased financial strain and potential consequences like foreclosure.

“But lenders have readied themselves for a tsunami of customers seeking assistance with their home loans amid the uptick in mortgage rates and broader cost-of-living pressures on household budgets.”

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