The artificially cheap borrowing bubble well and truly burst at the start of 2022, and we’re beginning to seriously feel the ramifications now. It sounds absurd now but the Bank of England’s base rate was just 0.25% in January of that year, allowing some borrowers to fix their mortgages at rates below 2%.
Today, the base rate is 5% and in October, swap rates increased. As a result, lenders began to reprice their home loans upwards just as it looked like more borrowers would be able to secure a mortgage with a rate below 4%.
This year has been painful for many homeowners whose two- and three-year fixed-rate mortgages have ended. When remortgaging, they have found available rates are double what they had previously secured, with repayment costs rising sharply. For some, the leap has had catastrophic side effects.
Only in September 2024 did the Bank of England declare that the level of mortgage arrears has reached its highest level in a decade. Unsurprisingly, mortgage arrears have been steadily growing since 2022, with a direct correlation between a rising base rate and missed mortgage payments. The numbers do not make for happy reading. Total arrears have increased to £21.9 billion – a figure 32% higher than it was in 2023 and the highest recorded since 2014.
Not being able to afford your mortgage repayments is bad for mental as well as financial health, and the quicker the issue is resolved, the better. So what can homeowners do if they’re in mortgage arrears?
Doing nothing is not an option as the debt will mount and interest will still apply. In the most serious of cases, the mortgage lender will retain the right to take the borrower to court or repossess the property. Speaking to the lender or Citizens Advice is essential, and they may recommend the following:
The above, however, rely on the borrower either having other sources of finance and/or a lump sum, a reversal of fortunes that enables them to start affording their repayments again and a sympathetic lender but what happens if none of those apply?
It is possible to sell a property where the owner has accrued mortgage arrears. In fact, it is often the best way to stop repossession, settle the debt and potentially free equity to improve overall financial health.
Selling with mortgage arrears is even possible if you are in negative equity – this is when the mortgage debt is greater than the house’s value. If the proceeds from the property sale are not enough to cover the unpaid mortgage, the lender will organise for the deficit to be repaid in instalments.
A word of warning for those in arrears who are considering selling. A drawn-out sale should be avoided. The longer the property is on the market, the more interest and arrears will build. The latest figures from Zoopla suggest it is taking an average of 25 weeks to complete a sale, from the moment the home is listed on line to moving out day. That can equate to another six months of mortgage arrears if the seller can’t afford their repayments during the sale. Some research even suggests the average sale can take six months to complete.
A sale to Open Property Group is designed especially for those with mortgage arrears as we offer super-speedy exchanges and completions that halt arrears in their tracks. Just how quick? When you sell to Open Property Group, it’s an average of just 35 days from cash offer to exchange, and we can organise completion for seven days after.
Open Property Group delivers quick results as we buy for cash directly from the seller. There’s no need for an estate agent, no waiting for the right buyer to appear and no mortgage approval process to sit through. We prefer to keep things simple and speedy.
If you are worried you might not be able to afford your mortgage repayments as your fixed rate is ending, or you have already started to build a mortgage debt, contact our team. We have a wealth of advice and experience, and can help you decide if a fast cash property sale is your best solution.
*negative equity may leave a residual debt to pay after a sale
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