Homeowner Defaults Surge as Rate Hikes Hit UK Housing

Homeowner Defaults Surge as Rate Hikes Hit UK Housing

Hundreds of British homeowners have lost their properties to bank repossessions this year as rising interest rates squeeze debt payments, new figures show Invest-Gate reports.

Some 440 buy-to-let homes were repossessed in the second quarter, up 7% from the previous three months, according to UK Finance, a banking industry body. The number of landlord-owned properties in arrears jumped 28% in the period.

Overall, 8,980 homeowners defaulted on mortgages in the second quarter as borrowing costs rose, more than double the number a year earlier, UK Finance said.

Some 2,300 were behind on payments by 5-10% of their balance, while about 2,000 owed over 10%.

The data underscores the strain higher rates are putting on stretched households. Average mortgages now top 4% after multiple hikes from the Bank of England, straining finances as inflation erodes living standards.

“This is a sign we’re entering a new phase of deterioration through 2024 as over 1.4 million face remortgaging at far higher levels than expected,” said Louis Shaw of Shaw Financial Services. Younger homeowners who purchased near peaks could be vulnerable if prices fall further, squeezing equity buffers.

The challenging outlook was reinforced by a Royal Institute of Chartered Surveyors gauge showing the steepest drop in selling prices since 2009.

Half of the sellers cut asking prices in July. UK real estate has fallen 2.4% in the past year.

As affordability pressures mount, landlords claim rising borrowing costs and tax changes are pushing some out of the sector, reducing rental options. Tighter financial conditions point to more homeowner stress ahead.


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