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Nearly Half of People with Adverse Credit say Overall Debt Up

mortgage arrears

it may come as no surprise given the continues cost of living crisis but according to a recent study, around 43% of people with adverse credit said that their overall level of debt went up during 2023. 

The study, conducted by Pepper Money Specialist Lending Study found that this was an increase from 33% in its previous report.

The report continued that 30% of people with adverse credit have outstanding debts, excluding mortgage, mortgage arrears and student loans, of more than £5,000 and nearly one in ten have outstanding debt over £15,000.

The study continued that 45% of people with adverse credit have upped their use of buy now pay later in the last year, with 17% saying that that it had increased a lot.

Ryan Brailsford, business development director at Pepper Money, said: “It’s often the case that customers who have a history of adverse credit also have significant balances on unsecured debt. One way to get on top of these debts is by raising capital with a remortgage to pay off the separate balances, consolidating them into additional borrowing secured on their property.

“Restructuring finances in this way requires careful consideration. However, in the right circumstances, it can significantly reduce the monthly cost of servicing that debt, which could prove a vital lifeline for households struggling to make ends meet in the current environment.”

Mortgage Arrears & Repossessions Up

However, whilst unsecured debts are up and overall debts are up, the interest rates undergoing unprecedented increases to 5.25% in 2023 led many mortgage market analysts to suggest there was far worse to come as the number of UK mortgage customers who were on fixed rates of approx 2% before the Liz Truss mini budget of Sep 2022 are not facing fixed rates of over 5%.

In its recent Financial Stability Report, published on 6 December, the Bank of England said around 900,000 borrowers are set to see their monthly mortgage repayments jump by more than £500 this year, with some 20% of these homeowners seeing a monthly increase of more than £1,000.  This is because they fixed their rate at around 2% two years ago and are now facing rates of around 5% when they move onto a fresh deal when their current one expires.

This huge increase in mortgage repayments will be more upward pressure on affordability and increase the likelihood of mortgage arrears.

Supporting this continued sign of a faltering mortgage market, UK Finance reported that the only mortgage market metrics that increased in 2023, were the negative ones that measure the level of mortgages falling into arrears and the number of mortgages ending in repossession.

The level of new mortgages falling into arrears was 105,600 which is a 30% increase on 2022. The number of repossessions was up by 4400 which is a 13% increase on 2022.

In its recent Financial Stability Report, published on 6 December, the Bank of England said around 900,000 borrowers are set to see their monthly mortgage repayments jump by more than £500 this year, with some 20% of these homeowners seeing a monthly increase of more than £1,000.  This is because they fixed their rate at around 2% two years ago and are now facing rates of around 5% when they move onto a fresh deal when their current one expires.

Arrears Forecast for 2024

UK Finance predict that we will see mortgage arrears increase by 23,200 to 128,800 cases by the end of 2024 which would equate to a 22% rise. Additionally, UK Finance predict that repossessions will increase by 16 per cent to 5,100 .

UK small business news outlet Business Chamber spoke to bad credit mortgages specialist Tony Higham of Mortgage Success and Adverse.Online, who said, “Looking back at the 2023 UK mortgage market was some sobering reading indeed as the continued rise in the cost of living has had an hugely adverse affect on household finances.

The best advice I can give to people struggling now is to address any issues without delay and to not make matters worse by avoiding speaking with their creditors.

There is no doubt that 2024 will remain challenging with the continues cost of living crisis, high inflation and high interest rates but with recent research showing that some 96% of home buyers responded to say that their mortgage broker was invaluable to them, it is more important than ever to speak to a specialist bad credit mortgage advisor and assess what your options are, in switching mortgages and/or reducing you monthly repayments by consolidating your borrowing from available equity in your home.

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