Mortgage arrears serve as a significant indicator of consumer and broader economic health, making the latest data from UK Finance particularly welcome. Compared to the previous quarter, mortgage arrears experienced a slight decline in Q4 2024. Following a peak in Q1 2023, they seem to be on a confirmed downward trend.
Looking at the data in a little more detail, in Q4, 92,170 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance, 2% below the Q3 position.
Assessing the repossession data, the numbers are, on the face of it, more concerning but should be viewed in their long-term context. 1,030 homeowner-mortgaged properties were repossessed in Q4, 12% up on the previous quarter.
Nevertheless, the number remains significantly below the long-term average. Last year’s 6,440 repossessions were 20% lower than the average for the five years before 2020 and 87% below the previous peak in 2009.
Falling interest rates are crucial to sustaining the arrears trend. Therefore, the Bank of England’s announcement yesterday of another interest rate cut, bringing the bank rate down to 4.5% from 4.75%, is very welcome.
The rate reduction should make borrowing cheaper, and although some lenders may have already factored in the rate reduction into their lending rates, the overall impact should be positive for anyone struggling with mortgage debt and help boost consumer spending for those who can afford to.
Source: UK Finance