Mortgage defaults have risen at their fastest pace since 2009 as lenders warn over plans to restrict the supply of deals.
There has been a spike in the number of homeowners missing mortgage payments, data from the Bank of England shows, as they battle high interest rates.
Problems in the property market have been compounded by banks cutting mortgage lending to households for the second quarter in a row, the Bank said, with further reductions expected before the end of the year.
The proportion of banks reporting an increase in missed payments between July and September outweighed the number reporting a fall in defaults by a margin of 43.3pc, up from 30.9pc.
This is the highest level since the global financial crisis.
Lenders warned that defaults will increase further over the coming three months.
The figures reveal how homeowners are increasingly struggling to meet their mortgage payments, as fixed-rate deals expire and they are forced to refinance at higher rates.
A growing number of banks are reporting losses because of missed mortgage payments.
While existing homeowners struggled, buyer demand for new mortgages also fell sharply between June and September as the summer increase in mortgage rates hit buyers’ borrowing power.
The net balance of lenders reporting a fall in demand for secured loans to households plunged to -54.9pc, a major swing from the positive reading of 52.7 in the previous quarter.
Lenders warned demand would continue to fall over the coming three months.
Mortgage rates fell through the spring but soared during the summer after fears the Bank of England could take further action to tame inflation.
Between late May and the end of July, the average rate on a two-year fix jumped from 5.33pc to 6.86pc, according to Moneyfacts.
Rates have since cooled to 6.38pc, but this is still more than double the 2.38pc rate a buyer could secure on a two-year fix two years ago. The difference is an extra £450 a month on a typical £200,000 loan.
Ashley Webb, UK economist at Capital Economics, said: “Our forecast that mortgage rates will stay above 5pc until late 2024 suggests that the weakness in bank lending will weigh more heavily on real activity in the coming quarters.”
Source: finance.yahoo.com