Official statistics have shown that mortgage arrears across the board have fallen and continue to fall drastically, nearing historical lows according to UK Finance.
UK finance has claimed that furlough schemes and mortgage payment deferrals, implemented as a result of the coronavirus pandemic, has helped mortgage customers stay out of arrears and be more cautious about how they budget their money. The sharp decrease in mortgage arrears has also ultimately led to a reduction of property repossessions compared to the usual steady trends.
Rozi Jones, writing for Financial reporter has said “Overall, there was a reduction of 2,400 mortgages in arrears compared with the previous quarter, with a total of 74,210 homeowner mortgages in arrears of 2.5% or more of the outstanding balance. Within the total, there were 25,110 homeowner mortgages in early arrears (those between 2.5 and 5% of balance in arrears), a decrease of 5% on the previous quarter and 10% fewer than the same period in 2020. Barring an initial uptick at the end of March 2020, these early arrears figures have remained lower than the number seen before the pandemic began.”
But does this look sustainable in the long run? Of course, we would all like to see mortgage repayments made on time but unfortunately the reality is that sometimes peoples circumstances change and these things are unavoidable. With furlough ending and rising inflation, many borrowers may end up struggling financially. UK Finance predicts that lenders’ provision of tailored forbearance to customers in difficulty ‘will moderate, but not prevent’, increases in early arrears.
MPowered Mortgages distribution director Emma Hollingworth inputs: “The long-term impact of the pandemic may not yet be visible and there remains a number of borrowers who faced financial difficulty pre-pandemic who have continued to build up arrears through the crisis.”
Realistically, the best course of action if you suspect that you might struggle with keeping up with your mortgage payments is to find a solution sooner rather than later. If your mortgage payments are unmanageable for you or are stretching your finances, you may want to consider restructuring your current deal to better suit your budget. With interest rates staying at relatively low levels, your current deal may not be best and the difference in rates could make an astronomical difference to your budgeting.