top of page
  • Writer's pictureMatthew Pigrome

Mortgage Update: Mortgage Defaults Surge to Highest Level Since 2009

Friday 13th October 2023.

In a concerning development for homeowners and the property market, mortgage defaults have spiked at a rate not seen since the financial crisis of 2009. The Bank of England's data reveals a significant increase in the number of homeowners struggling to meet their mortgage payments, primarily due to the burden of high interest rates.

Adding to the woes of homeowners, banks have continued to curtail mortgage lending for the second consecutive quarter, with indications that further reductions are on the horizon before the year's end. Lenders are cautioning that the default rates are poised to rise even further in the coming three months.

Homeowners Facing Mortgage Defaults Amid Rising Rates

This alarming trend is driven by several factors. As fixed-rate mortgage deals expire, homeowners are confronted with the need to refinance at higher rates, putting increased pressure on their finances. Many banks are reporting losses as a direct consequence of these missed mortgage payments.

Notably, the struggle isn't confined to existing homeowners alone. The demand for new mortgages has plummeted sharply between June and September, coinciding with the surge in mortgage rates during the summer months. The net balance of lenders reporting a decline in demand for secured loans to households has witnessed a significant swing, dropping to -54.9%, a stark contrast to the previous quarter's positive reading of 52.7%. Lenders are pessimistic, warning that demand is expected to continue falling over the next three months.

While mortgage rates briefly dipped during the spring, they soared over the summer amid concerns that the Bank of England might take further measures to combat inflation. The average rate on a two-year fixed mortgage jumped from 5.33% to 6.86% between late May and the end of July, according to Moneyfacts. Although rates have moderated slightly to 6.38%, they still remain well above the 2.38% rate available for a two-year fix just two years ago. This difference translates to an extra £450 per month on a typical £200,000 loan.

Ashley Webb, a UK economist at Capital Economics, has warned that if mortgage rates continue to hover above 5% until late 2024, it could significantly impact real economic activity in the coming quarters. The combination of rising defaults and reduced borrowing power is creating a challenging environment for homeowners and the housing market at large.

As the situation unfolds, homeowners, lenders, and policymakers will be closely monitoring these developments, hoping for signs of stabilisation and recovery in the mortgage market.

Take Action Now! Protect Your Home and Financial Future

If you're among the many homeowners feeling the strain of rising mortgage rates, it's crucial to act swiftly. Your home and financial stability are at stake. Here's what you can do:

  1. Review Your Mortgage: Assess your current mortgage terms and explore options for refinancing or renegotiating to secure a more manageable rate.

  2. Budget Wisely: Create a budget that accounts for higher mortgage payments. Cutting unnecessary expenses and managing your finances prudently can make a significant difference.

  3. Seek Professional Advice: Don't hesitate to consult with a financial advisor or mortgage expert, such as Mortgage321, who can provide tailored guidance based on your specific circumstances.

  4. Explore Government Assistance: Research government programs or initiatives aimed at supporting homeowners during challenging times. You might find valuable resources that can ease your financial burden.

  5. Stay Informed: Keep a close eye on economic and mortgage rate trends. Understanding the market can help you make informed decisions.

The time to act is now. Safeguard your home and your financial well-being. By taking proactive steps, you can navigate these challenging times with greater confidence. Your future starts with the actions you take today.


bottom of page