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UK households are struggling to keep up with mortgage payments, as 149,000 mortgages have temporarily reduced monthly payments under new Financial Conduct Authority (FCA) rules.
Around 214,000 mortgages, representing 2.6% of regulated contracts, were restructured, with many borrowers opting for interest-only repayments or extending their mortgage terms, according to the latest data from the Bank of England and the FCA.
In total, 159 properties were repossessed within 12 months of missing a first payment, a small figure given the scale of arrears. The FCA notes that repossessions were largely due to customer-driven factors, such as voluntary repossessions or vacant properties.
Firms have offered a range of forbearance measures under the Mortgage Charter, with some options extending beyond the new regulatory framework and reflecting standard industry practices.
Quilter financial planner Holly Tomlinson said: “The data on the Mortgage Charter is interesting, with around 1.7 million mortgages benefiting from the flexibility options introduced. Measures such as temporary payment reductions and interest-only terms have helped 214,000 borrowers manage their repayments.”
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However, she cautioned that it remains unclear whether these measures were truly novel or if they would have been offered anyway. “For example, 1,738,489 people with mortgages approaching the end of a fixed-rate deal locked into a new deal up to six months ahead of maturity. This is typically standard practice and makes up the majority of those who have benefited,” Tomlinson noted.
She added: “Similarly, 410,345 people locked into an alternative deal before the start of their new fixed-rate term. What is clear from this data is that while things are improving in the property market, we are not quite out of the woods yet, and those remortgaging in the new year might be in for a nasty shock.”
In another sign that UK households are still struggling, the total value of outstanding mortgage balances in arrears climbed to £21.9bn, an 17.5% increase from the previous year,
The proportion of new mortgage advances with loan-to-value (LTV) ratios exceeding 90% has also risen, signalling challenges in saving for a deposit. This share increased by 0.6 percentage points from the previous quarter to 6.6% — the highest since Q2 2008 — and was 1.6 percentage points higher than a year ago.
Despite these pressures, the latest data reveals some signs of stabilisation. New arrears, for example, have dropped by 1.3 percentage points to 9.7% from the previous quarter, a decrease of 6.3 percentage points compared to the same period last year.