The latest data from Pepper Advantage reveals a notable slowdown in the growth rate of mortgage arrears to 3.9% in Quarter 1, down from 5.7% in Quarter 4 2023. This marks the lowest quarterly growth rate since September 2022, a period when the combined impacts of the cost-of-living crisis and the September 2022 Mini-Budget began to strain UK household budgets. Despite the deceleration in arrears growth, the absolute rate of arrears remains at its highest level since 2008.
Interestingly, regional disparities emerge, with the North East and North West of England experiencing an increase in the rate of arrears growth, while the West Midlands and East Anglia show minimal growth rates of only 0.4% and 0.5%, respectively. Notably, the South East, South West, and Greater London exhibit the lowest absolute arrears rates, contrasting sharply with the higher rates observed in the North East, North West, and Yorkshire and Humberside.
Analysis by age group reveals that homeowners aged 60+ and 51-60 face the highest levels of arrears, followed by those aged 41-50. However, there is a positive trend across all age groups, with lower growth rates in arrears, particularly notable in mortgages owned by individuals aged 31-40, which saw a mere 0.1 percentage point increase quarter-on-quarter. This trend could be attributed to stabilizing inflation and healthy wage growth.
Moreover, the percentage of residential mortgages experiencing direct debit rejections (DDRs) declined by 2.3% in Q1 2024 compared to Q4 2023, marking the first quarterly decrease since Q2 2023. Aaron Milburn, UK Managing Director for Pepper Advantage, acknowledges the positive trend but emphasizes the lingering complexity of the situation. While lower inflation and increased wages alleviate pressure on household budgets in some areas, regional and demographic disparities persist, highlighting the uneven distribution of financial challenges.
In conclusion, while the latest data offers some optimism with a slowdown in arrears growth and reduced DDRs, the road to recovery remains nuanced and uncertain. Managers and lenders must remain vigilant, recognizing the ongoing need for support, particularly among vulnerable groups, as the economic landscape continues to evolve.
