The value of outstanding mortgage balances with arrears climbed by 13% over the second quarter to total £16.9bn, new figures released by the Bank of England (BoE) have shown.

Mortgages in arrears have also risen by 28.8% over the year, and the total value now accounts for 1.02% of outstanding mortgage balances.

New arrears cases equated to 16% of the total outstanding balances with arrears in Q2, which the BoE said was little changed compared to the previous quarter.

The Bank’s latest figures indicated that the outstanding value of all residential mortgage loans in the UK was worth£1.66trn at the end of Q2. This figure represents a 0.4% rise compared to last year but is the largest decrease on the previous quarter since reporting began in 2007.

Senior personal finance analyst at interactive investor, Myron Jobson, said that the figures paint a picture of a “disjointed mortgage marketplace reeling from spiralling repayment costs”.

“Outstanding mortgage balances with arrears have also ticked higher – although it only accounts for just over 1% of outstanding mortgage balances,” Jobson commented. “The upward trend is worrying but not unexpected.

“History has shown that the uptick in home repossession typically coincide with increases to the base rate. While higher monthly repayments could lead to a rise in mortgage arrears the record-breaking wage growth run and relatively low level of unemployment could slow the rise in repossessions.

“However, with the cost of housing on the up, many homeowners struggling to repay their mortgage of families would be wary that something like a sudden illness or job loss, could leave them homeless.”

In terms of gross mortgage advances, the Bank’s figures showed that Q2’s value reached £52.4bn, which was £6.3bn lower than the previous quarter, and 32.8% lower than in Q2 2022. The BoE confirmed that this was the lowest quarterly total observed since Q2 2020.

Looking ahead, the figures indicated that the value of new mortgage commitments – which concerns lending agreed to be advanced in the coming months – was 26.2% greater in Q2 than the previous quarter, but 26.6% less than a year ago, at £61.7bn. This was the first increase and highest value observed by the BoE since Q3 2022.

“There are signs that the mortgage crisis which has stopped many from participating in the property market this year may be turning a corner,” Jobson added.

“Average mortgage rates continue to fall from lofty heights seen in July following sizeable falls in inflation, which could mean that interest rates might not peak as high as feared. This is a confidence booster for those looking to take out a mortgage soon.”

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