New Data Shows Q1 UK Mortgage Arrears Growth Slows to Lowest Since Mini-Budget
April 29 2024 - 3:00AM
Business Wire
- Rate of UK arrears growth slowed to 3.9% in Q1 2024 from
5.7% in Q4 2023; lowest quarterly growth rate since Sept 2022
Mini-Budget
- North East and North West are the only regions in which
arrears growth rate increased
- Failed mortgage payment rate, a leading indicator of
borrower stress, falls
Pepper Advantage, a global credit intelligence company, today
published data on its portfolio of over 100,000 UK residential
mortgages that shows the rate of mortgage arrears* growth slowed in
Q1 2024 to its lowest rate since Q4 2022, when the combined effects
of the cost-of-living crisis and the September 2022 Mini-Budget
began to impact UK household budgets.
The percentage of mortgages in arrears across Pepper Advantage’s
UK portfolio grew by 3.9% in Q1 2024 compared to Q4 2023. This
figure compares to a quarterly growth rate of 5.7% in Q4 2023 and
7.0% in Q3 2023. While the rate of arrears growth has slowed, the
absolute rate of arrears remains at the highest level since
2008.
Other key findings from Pepper Advantage’s analysis include:
- Northern arrears growth disparity: The North East and
North West of England were the only UK regions in which the rate of
arrears growth increased, while the West Midlands and East Anglia
showed the lowest growth rates of only 0.4% and 0.5%, respectively.
The South East, South West and Greater London had the lowest
absolute arrears rates in the UK, while the North East, North West,
and Yorkshire and Humberside had the highest.
- Older age groups have the highest absolute arrears
rates: Homeowners aged 60+ and 51-60 saw the first and second
highest levels of arrears respectively, followed by those aged
41-50. However, every age group saw lower growth in the arrears
rate in Q1. This trend was particularly noticeable for mortgages
owned by people aged 31-40, which grew by only 0.1 percentage
points quarter-on-quarter, possibly due to a combination of
stabilizing inflation and healthy wage growth.
- Direct Debit Rejections** decline in Q1: The percentage
of residential mortgages that experienced a direct debit rejection
(DDR) fell 2.3% in Q1 2024 compared to Q4 2023. This is the first
quarterly decrease since Q2 2023 and breaks the trend of DDRs
typically increasing following the December holiday period.
Aaron Milburn, UK Managing Director for Pepper Advantage,
said: “While the slowing growth in the rate of arrears and
lower direct debit rejections are welcome news for lenders and
borrowers, the picture remains complex, and the overall level of
arrears is still the highest since the 2008 financial crisis.
“The slowing growth suggests an increasingly resilient UK
economy as lower inflation and higher-than-expected wage increases
alleviate pressure on household budgets in some areas. However, the
disparity seen between regions and age groups shows that financial
challenges are not evenly spread. The Q1 data contains some hopeful
indicators, but it is too soon to say if these trends will continue
into Q2. Managers and lenders must be cognisant that some groups
remain under pressure and will likely require support for some
time.”
To access the full report, see here:
https://www.pepper-advantage.com/resources/pace-of-uk-mortgage-payment-failures-slows-in-q1
* Mortgages in arrears are defined as those that are 30+ days
delinquent in payment.
**A direct debit rejection is a form of missed mortgage payment
that typically occurs due to insufficient funds when a direct debit
is called and is an early indicator of borrower stress.
About Pepper Advantage
Pepper Advantage is a global credit intelligence company that
offers a range of data led and credit management services via a
technology platform that spans across Asia, Europe, and the United
Kingdom. The company, with $55 billion (USD) assets under
management, operates in multiple asset classes including
residential and commercial mortgages, real estate, SME loans, asset
financing and leasing, auto and consumer loans, credit cards,
retail finance and BNPL, in addition to offering outsourced
operational support services to both financial and non-financial
clients. It helps investors, financial institutions, fintechs, and
banks manage their credit portfolios, reducing the cost and
complexities of systems and supporting new non-bank lending, with a
particular focus on clients whose customers are underserved by
traditional mainstream lenders.
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