The value of outstanding mortgage balances with arrears has increased by 18% year-on-year to £21.9bn, the Bank of England (BoE) has revealed.

The latest mortgage lending data from the BoE and the Financial Conduct Authority (FCA) revealed that despite the annual increase in value, this has fallen by 0.4% compared with the previous quarter.

The data showed that the number of new mortgage arrears cases, as a proportion of total outstanding balances with arrears, decreased by 1.3 percentage points quarter-on-quarter to 9.7%, an annual drop of 6.3 percentage points.

Overall, the outstanding value of all residential mortgage loans increased by 0.6% quarter-on-quarter to £1.67bn, which is the highest stock of outstanding mortgage loans since Q1 2023, increasing by 0.8% year-on-year.

Director of risk at Broadstone, Tom Cuppello, said: "The impacts of the significant increases to mortgage rates over the past couple of years is reflected in a notable rise to the value of mortgage balances with arrears. This is now slowing and new arrears cases are also falling as households adjust to the new rate environment but there remains further pain to come.

"The BoE forecasts that around 4.4 million mortgages are expected to see payments rise by 2027, including some 420,000 households that are bracing for £500-per-month hikes. While household financial resilience has stabilised since the worst of the cost of living crisis, it is clear that there are still strong headwinds with the base rate expected to remain unchanged at 4.75% at next week’s BoE meeting.

"The macroeconomic environment remains uncertain and volatile so there can be no let up from lenders in the support they offer to their customers. As we head into a difficult period of the year for personal finances, it is evident that lenders need to remain proactive in supporting the long-term financial interests of their customers."

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