Mortgage defaults have surged at their fastest rate since 2009 as rapidly rising interest rates push more people into financial difficulty.
Bank of England data showed that the share of lenders reporting an increase in missed mortgage payments is now the highest it has been since the global financial crisis.
The proportion of banks reporting an increase in missed payments between April and June outweighed the number reporting a fall in defaults by a margin of 30.9pc.
Reports of defaults have more than doubled compared to at the start of the year, according to the Bank’s regular credit conditions survey.
Lenders warned that they expect defaults to continue rising over the summer.
More than 75,000 homeowners were behind on their mortgage payments in the first three months of the year, according to official data from banking lobby group UK Finance.
Families are falling into financial difficulty after a rapid rise in housing costs.
The average two-year fixed-rate mortgage stood at 6.75pc on Thursday, up from 5.33pc in May and 2.98pc two years ago.
Rates have surged in recent weeks after surprise inflation data, which has prompted traders to predict interest rates will peak above 6pc next year as the Bank battles to contain price rises.
The sharp jump in rates means the annual cost of taking out a typical £200,000 loan has surged by more than £2,000 in less than two months, according to Moneyfacts, a data company.
Around 4.5 million mortgage holders have already seen their mortgage costs increase after coming to the end of cheap fixed rate deals and a further four million or so will face higher costs by the end of 2026, the Bank said earlier this week.
Nearly a million households will see their monthly mortgage payments rise by more than £500 – or an extra £6,000 per year.
Justin Moy, founder at broker EHF Mortgages, said that borrowers were scrambling to use their savings and borrow from family members to afford “brutal mortgage payment increases”.
But he warned: “Unfortunately some won’t have that option and will inevitably default at some point.”
Despite the rise in defaults, the share of lenders reporting a rise in missed payments is still below levels seen during the financial crisis years. At the start of 2009, a net balance of 68.2pc of banks reported a rise in defaults.
The Bank’s latest credit conditions survey showed there was also a large jump in the number of lenders expecting losses to rise as a result of missed payments.
Mortgage rates have soared as the Bank of England has increased the benchmark interest rate from 0.1pc to 5pc since December 2021.
Source: finance.yahoo.com