UK mortgage arrears fall: Are we turning a corner?

For the first time since the pandemic, the number of people falling behind with their mortgage and missing payments have both gone down.

So does this mean that after years of high interest rates and cost-of-living pressures, financial pressures are starting to ease?

Well, let’s take a look at the figures.

According to Pepper Advantage, which manages over 100,000 UK residential mortgages, overall arrears fell by 4.4% between April and June.

Meanwhile, direct debit rejections (when payments bounce) fell by 5.1%.

What’s behind the improvement?

The biggest change came in the residential mortgage market, where arrears fell by 4.7%.

And encouragingly, arrears rates fell in every part for the first time in four years.

The biggest improvements were in:

• the north-west - down 7.9%
• Wales - down 7.7%
• East Midlands - down 7.0%

It’s perhaps no coincidence that interest rates have come down gradually over the last year.

Just this week, the Bank of England cut interest for the fifth time in the last year, taking them to 4% - the lowest level since March 2023.

And while inflation, which rose to 3.6% in June, remains well above the Bank of England’s target of 2%, it’s considerably lower than it was in late 2022.

What does this mean for the future?

Well, if the last few years have taught us anything, it’s that we can never know what’s just round the corner.

Aaron Milburn, managing director of Pepper Advantage in the UK, described the drop in residential mortgage arrears as “a promising sign that some household financial pressures may be easing”.

However, he stressed that “any recovery remains fragile”.

“Unexpected economic shocks or hits to household budgets could quickly reverse this improvement,” Mr Milburn said.

What can I do if I’m struggling

If you start falling behind with your mortgage payments, don’t panic, as support is available.

Talk to your lender

The first thing you should do is speak to your lender as soon as possible.

They’ll look at ways of reducing your monthly payments, such as switching to interest-only or extending your mortgage term.

Get expert advice

We know how overwhelming money worries can be. If you’re behind on payments or worried you will be, we’re here to help.

Take control of your budget

If money feels tight right now, it’s worth looking at how much you’ve got coming in and where it’s going.

You can then work out where savings can be made and start prioritising your spending.

Use our free budget planner to get started.