Mortgage repossessions surge by 24%

Analyst highlights the impact of the slow decline of interest rates

Mortgage repossessions surge by 24%

The number of mortgage repossessions has jumped by 24% in the past year, with lenders filing to repossess 17,746 homes in 2023/24 (in the year ending March 31).

According to a report by Mazars accounting, the data, sourced from the Ministry of Justice, show a significant increase from 14,357 in 2022/23, indicating the growing financial strain on homeowners amid prolonged high interest rates. The report not only underscores the challenges faced by borrowers in the current economic climate but also highlights the importance of proactive engagement with lenders to avoid repossession.

Ed Thomas, director in Mazars’ restructuring services practice, attributed the increase to the sustained high interest rates. “As interest rates stay higher for longer, more and more homeowners are finding they just can’t make their mortgage payments and have little chance of catching up on arrears,” he said.

Thomas noted that many homeowners had initially stretched their finances to afford mortgages at lower rates of 3% or less. However, refinancing at higher rates of 5% or 6% has proven unsustainable for some.

“Mortgage lenders do show forbearance with struggling borrowers, but there are limits to that,” he noted. “With the market now realising that interest rates are going to decline at a much slower rate, they are having to take action. For people who bury their heads in the sand and don’t engage with their mortgage lenders, repossession is now a greater possibility.”

The Bank of England has hinted that rate cuts could occur this summer. Governor Ben Broadbent indicated in a speech that a summer rate cut was “possible,” ahead of figures expected to show a sharp drop in inflation. Earlier this month, the Bank suggested that rate cuts could be actively considered in June and August, depending on economic performance.

While inflation has been falling over the past year, it has remained higher than some economists had forecast. This has delayed expectations for rate cuts. The most recent inflation data showed a 3.2% increase in prices for the year to March, though the figure released this week is expected to drop closer to the Bank’s target of 2%.