The Bank of England has issued a warning that by the close of the current year, approximately 650,000 families could be on the brink of defaulting on their mortgage payments, thereby threatening lender stability.
Economic journalist, Melissa Lawford, delved into its financial stability report:
There has been a sharp rise in the percentage of families dedicating 70% or more of their after-tax income, after covering essential expenses, towards repaying mortgage and debt. The figures have escalated from 1.6% in the previous summer to 2% at the dawn of 2023, a peak not observed since the financial crisis.
The 70% marker signifies a critical point where families are more prone to struggle with their debt payments.
As 2023 draws to a close, the proportion of families with mortgages breaching this critical point is projected to increase to 2.3% as more families near the end of their fixed-rate mortgage contracts. This suggests that about 650,000 families are in danger of slipping into overdue payments.
The Bank of England cautioned, “A notable uptick in borrower defaults could pose a challenge to the robustness of lenders.”
However, these statistics are still expected to remain below the 2007 record of 3.4%, or 870,000 families. To match this record by the end of 2024, mortgage rates would have to rise by three percentage points beyond current forecasts.
