Borrowers face growing financial strain as arrears increase across mortgage types
Mortgage arrears in the UK increased in the fourth quarter of 2024, reversing two consecutive quarters of improvement, according to new data from global credit intelligence firm Pepper Advantage.
The company’s latest report, which tracks over 100,000 UK residential mortgages, shows that arrears rose by 2.4% from the previous quarter, reflecting growing financial strain on borrowers.
Arrears increased across all mortgage types, including fixed rate, variable rate, and buy-to-let loans. While arrears in the BTL sector grew at a slower pace than in Q3 — rising by 1.5% compared to 9.7%— the overall BTL arrears rate remains significantly higher than a year ago, up 38.1% since Q4 2023.
The Pepper Advantage report also found an 8.4% increase in fixed rate mortgage arrears in Q4, the steepest rise since Q1 2024, when the growth rate reached 10.1%. Meanwhile, arrears for variable rate mortgages climbed by 2.3%, also marking the highest increase in this category since Q1 of last year, when arrears rose by 3.9%.
New mortgage originations declined by 9.2% quarter-on-quarter, reflecting seasonal trends as market activity typically slows during the holiday period. However, originations remained stable compared to Q4 2023.
Regional data showed that arrears rose across most of the UK, except in the East Midlands, North East, and Scotland, where rates fell by 1.8%, 2.4%, and 3.2%, respectively. In other regions, arrears growth ranged between 0.7% and 5.7%.
“The three-month run-up to the holidays is often a challenging time for household finances as families balance higher spending with bills and mortgage repayments,” said Fraser Gemmell (pictured), chief executive of Pepper Advantage. “For borrowers, these strains were accentuated in Q4 by unexpectedly higher borrowing costs, particularly as many cheaper fixed term mortgages came to an end.
“While arrears growth in some regions is abating, the overall level remains remarkably high across the borrower types, age, and product areas. Increasing house sales have captured headlines in recent weeks as buyers race to beat the stamp duty deadline, but this is not the whole picture. Inflationary pressures remain a key concern for many households and will likely persist for the foreseeable future. Supporting these households remains crucial.”
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