Rents rocket, mortgage arrears increase and repossessions set to rise
The rising cost of living has exposed Britain's housing crisis, causing a tectonic shift which has left homeowners, landlords and renters falling through the cracks.
Repossessions expected to rise, more people have fallen into mortgage arrears and rents are rocketing - all while the cost of almost everything else continues to increase.
And the situation will only get better when inflation falls considerably and a significant number of new houses are built.
Trade body UK Finance sought to reassure struggling homeowners, reminding them support is available, but the situation appears tougher for renters.
A spokesperson said: “It’s important for homeowners and landlords to remember that there is support available to anyone struggling with their finances. If you think you might have difficulty making your mortgage payments, reach out to your lender early to find out the options available.”
Homeowners struggle with mortgage payments
There were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, which was 7% higher than in the previous quarter.
Within the total, 28,690 homeowners had arrears in the most severe band of more than 10% of the mortgage balance, which was up by 2% compared with the previous quarter.
There were 8,980 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, 28% higher than in the previous quarter.
Mortgages in arrears accounted for 0.93% of homeowner mortgages outstanding and 0.44% of buy-to-let mortgages outstanding in the second quarter of 2023, UK Finance said.
Repossessions likely to rise
UK Finance said home repossessions are expected to rise, given ongoing cost-of-living challenges.
There were 440 buy-to-let mortgaged properties repossessed in the second quarter of 2023, which was 7% more than in the previous quarter.
Some 610 homeowner mortgaged properties were repossessed in the second quarter of 2023, 19% fewer than in the previous quarter.
Ripple effect hits renters
As the cost of living rises, mortgage holders have less disposable income, leading landlords to increase rent.
And a report by the Royal Institution of Chartered Surveyors (Rics) indicates most industry experts expect the situation to get worse.
A net balance of 63% of professionals expect rental prices to increase over the three months ahead, marking a fresh record high in records going back to the second quarter of 1999, Rics said.
Rics chief economist Simon Rubinsohn said: "Demand shows no signs of letting up, supply remains constrained and that means rents are likely to continue rising sharply despite the cost-of-living crisis.”
And higher mortgage rates have compounded issues for renters “which means the squeeze on tenants won’t vanish in the short term”, said Tom Bill, head of UK residential research at Knight Frank.
Commenting on Rics’ findings, Dan Wilson Craw, deputy chief executive of campaign group Generation Rent said: “In many cases tenants are being priced out of their homes and forced into the lettings market to compete for a new place to live.
“At the same time a lot of people who want to move can’t because rents on new tenancies have risen so rapidly. That has a knock-on effect for the number of homes coming on to the market.
“Long term, the answer is to build many more homes in the places people want to live, including social housing to allow more people to escape private renting.”
A government spokesman said: “We are on track to deliver one million new homes in this parliament and are investing £11.5 billion to build more of the affordable, quality homes this country needs."
Is there light at the end of the tunnel?
Some major mortgage lenders have been cutting rates this week, amid signs that stubbornly high inflation is easing. The Bank of England uses base rate rises, which affect borrowing costs, as a tool to subdue inflation.
Among the rate reductions, HSBC UK has cut some homebuyer, first-time buyer and remortgage rates on offer by up to 0.35 percentage points, as well as adding a £500 cashback incentive to some deals.
Halifax and First Direct became the latest to announce cuts to their mortgage rates on Thursday.
Halifax said it is reducing five-year fixed-rate mortgages by up to 0.71 percentage points, and two-year fixed-rate loans will fall by as much as 0.27 percentage points.
The cuts will take effect from Friday (11 August).
Halifax is part of Lloyds Banking Group, which remained the UK’s biggest mortgage lender last year, lending £52.7 billion in 2022, according to figures from trade association UK Finance.
First Direct said it has reduced rates across more than 20 of its two-, five- and 10-year fixed-rate mortgages by up to 0.20 percentage points, with immediate effect.
Chief executive Chris Pitt said: “Raising the money to buy a home can be a challenge at the moment and we want to help.”
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