The latest mortgage lending statistics from the BoE add to growing evidence that many aspiring buyers were still reeling from the violent gyrations in the mortgage market that followed the ill-fated mini-Budget back in September at the start of the year.
There has been little reprieve for aspiring buyers since then, with high property prices remaining a barrier for entry, while higher borrowing costs have pushed many to the sidelines until they can make the numbers work. As rates climb, affordability wanes, and the number of mortgage commitments dwindles.
Uncertainties over how high borrowing costs will rise to combat hot and sticky inflation could lead an increasing number of potential buyers to hold off on committing to a mortgage until conditions seem more favourable. The trouble is the situation could get worse before it gets better.
Market whispers of significant property price correction in the near future can also give pause to even the most eager of homebuyers. Uncertainty can breed caution, and caution often leads to a decline in mortgage commitments.
The uptick in mortgages in arrears highlights the fact that many homeowners have found themselves in a financially precarious position resulting from the double whammy of rising borrowing costs and rampant inflation.
There could unfortunately be a new wave of borrowers falling behind on repayments in the near future, as there are around 700,000 borrowers with fixed rate mortgages – the majority of which were set at interest rates below 2% – maturing in the second half of this year alone.
However, the current low level of unemployment could slow the rise in mortgage arrears and repossessions.
Myron Jobson is senior personal finance analyst at interactive investor
