The value of outstanding mortgage balances with arrears increased by 50.3% year-on-year, standing at £20.3bn in the final quarter of 2023.

In the Bank of England’s (BoE) new mortgage lenders and administrators statistics, it was revealed that this figure also increased by 9.2% from Q3 2023.

The proportion of total loan balances with arrears, relative to all outstanding mortgage balances, increased in the quarter from 1.12% to 1.23%, which is the highest since Q4 2016.

Mortgage expert at Quilter, Karen Noye, said: "New mortgage lenders and administrators statistics for Q4 2023 paint a very worrying picture of the mortgage market. The statistics show that the value of outstanding mortgage balances with arrears is over 50% higher than it was a year ago and has shot up nearly 10% (9.2%) in just one quarter.

"This shows that the large increase in mortgage rates seen over the last couple of years is really starting to bite for some borrowers and this is unfortunately causing them to fall into arrears as they simply can’t afford to keep up with their increased payments.

"The changes to national insurance and child benefit at the Budget last week, will barely help considering many people will have seen their mortgage payments shoot up by £300 or more a month.

"For those worried about falling into arrears, it is important to contact your lender as soon as possible as there are options that can help ease the pain such as going onto a cheaper interest only mortgage or setting up a payment plan. Discussing the problem and not burying your head in the sand is crucial though."

However, the BoE also found that the outstanding value on all residential mortgage loans decreased by 0.1% from the previous quarter to £1.6trn, which is 1.1% lower than a year earlier.

Furthermore, the value of gross mortgage advances decreased by 13.4% from the previous quarter to £54bn, which was 33.9% lower than the same period in 2022.

Noye added: "Positively, the statistics show that new arrears cases decreased by 2.6% from the previous quarter, to 13.2% of the total outstanding balances with arrears, but remained 0.2% higher than a year earlier. This may well continue to climb again though as more people come off fixed term mortgages set when rates were low.

"Elsewhere, the data points to a market in a deep freeze similarly suffering from the higher rates. While house prices have remained resilient, the value of new mortgage commitments (lending agreed to be advanced in the coming months) decreased by 6.6% from the previous quarter to £46bn, and was 21.2% lower than a year earlier. This illustrates a serious lack of demand and although prices continue to be buoyant if this dearth in demand continues prices may return to a downward trajectory.”

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