Fewer homeowners are missing mortgage payments than ever before
The number of homeowners struggling to keep up with mortgage payments has fallen to an all-time low in the first quarter of 2018.
The data, from UK Finance, showed that 78,800 people were in mortgage arrears of 2.5% or above, which may sound high but is in fact 8% lower than the same time last year and the lowest since records began.
In total, 1,200 saw their homes repossessed in Q1 2018.
Why are homeowners managing their mortgages so well?
One of the primary reasons is the low base rate over the last nine years of just 0.5% following the financial crash. Mortgage rates haven’t increased for many in some time, although some providers have slightly increased their interest of late.
Homeowners must ensure they are prepared and able to manage a rise in monthly mortgage payment through with the Bank of England expected to raise the rate soon.
Another key factor is the high levels of employment in the UK with a record 32 million in work – a record high. A high employment rate though would act as an indicator to the Bank of England that the base rate is ready to increase from its historic low for the first time in nearly a decade.
Chancellor Philip Hammond noted that: “The unemployment rate is at its lowest in over 40 years and with our ‘national living wage’ we are making sure that the lowest-paid feel the benefit with an extra £2,000 a year. Now the focus has to be on ensuring that wages keep rising faster than inflation so that living standards increase.”
And on the link between employment rates and the BoE’s confidence in base-rate increases, an economist at ING bank, James Smith said that: “As markets become increasingly sceptical about the prospects of a UK rate hike this year, the latest wage data could prompt a bit of a rethink.
“At 2.9%, earnings growth excluding bonuses is now running at the fastest rate since mid-2015 and will make the Bank of England more confident that their optimistic stance on wage growth is bearing fruit. Remember that survey evidence from Bank of England agents has been pointing to the best year for pay settlements since the crisis.”
It’s also been noted by industry experts that there is a growing tendency from providers to work with their clients to find a solution for late or missed payments so homeowners don’t suffer a repossession aside from an ultimate last resort of financial assistance has failed.