Arrears Reach 12 Year High – Worried? Take Your Time and Review Your Options
Written on 25 February 2025 by
Rising Mortgage Arrears in 2025 – What Homeowners Need to Know and How to Stay in Control
The economic landscape in the UK continues to evolve, and with it, mortgage arrears have been steadily increasing. For many homeowners, this is the first time they have faced significant financial pressure due to rising interest rates and the increasing cost of living.
While mortgage arrears have not yet reached record levels, the number of households struggling with repayments is growing. Understanding your options, taking proactive steps, and seeking the right guidance can help you stay in control of your financial situation and avoid unnecessary stress.
Current Mortgage Market Conditions
The Bank of England base rate now stands at 4.5% (as of February 2025), after several rate adjustments in response to inflationary pressures. Inflation is projected to reach 3.7% by autumn, which, while lower than previous highs, continues to impact household budgets.
The most recent data shows that in Q4 2024, 92,170 homeowner mortgages were in arrears of 2.5% or more, a 2% decrease from the previous quarter. However, the total value of outstanding mortgage balances with arrears has risen by 2.9% to £21.9 billion, which is 32% higher than the previous year.
With continued economic uncertainty and potential market fluctuations, now is the time for homeowners to be proactive and ensure they are making informed financial decisions.
What Options Do Homeowners Have?
If you're concerned about mortgage repayments, acting early can help prevent serious financial strain. Here are key steps you can take:
1. Talk to Your Mortgage Lender Early
Engaging with your lender as soon as possible is one of the most effective ways to stay in control. Lenders are required by the Financial Conduct Authority (FCA) to provide support for customers in financial difficulty, and they can offer solutions such as:
- Temporary repayment reductions – some lenders allow you to lower your monthly payments for a set period
- Switching to an interest-only mortgage – this can temporarily reduce your payments, giving you time to improve your financial position
- Extending your mortgage term – spreading repayments over a longer period can reduce your monthly payment
- Offering payment deferrals – in some cases, lenders may agree to defer payments for a short period to help you recover financially
2. Review Your Budget and Prioritise Key Expenses
With inflation impacting household bills, reviewing your budget and prioritising essential expenses can help you regain financial stability.
- List all monthly expenses - including mortgage payments, utilities, and outstanding loans
- Identify areas to cut back – even small savings on non-essential spending can help maintain mortgage payments
- Seek guidance from other creditors – if you have other loans or debts, speak with lenders to see if they offer any support options
3. Check for Protection Insurance That May Cover Your Mortgage
Many homeowners may not realise they have insurance policies that could cover their mortgage payments. If you have:
- Income protection insurance – this may cover a portion of your salary if you're unable to work
- Critical illness cover – if a medical condition is preventing you from working, you may be entitled to claim support
- Mortgage payment protection insurance (MPPI) – some policies are specifically designed to cover mortgage payments in cases of illness, redundancy, or financial hardship
4. Seek Professional Mortgage Advice
Whether you are worried about arrears, approaching the end of a fixed-rate deal, or unsure about your options, a mortgage broker can help you assess the best course of action. A broker can explore options such as:
- Remortgaging to secure a better rate
- Debt consolidation to reduce monthly repayments
- A product transfer with your existing lender for a more manageable deal
- Further advances for those with equity in their home who need financial flexibility
FCA Guidance on Mortgage Arrears
The FCA has set clear expectations for lenders to ensure fair treatment of customers experiencing financial difficulties:
- Lenders must consider individual circumstances and assess alternative repayment solutions.
- Reasonable efforts must be made to agree on a repayment plan before any legal action is considered.
- Repossession must only be used as a last resort when all other options have been exhausted.
If you are struggling, seeking guidance and working with your lender can help you avoid unnecessary financial distress and legal consequences.
Don’t Wait Until It’s Too Late
Mortgage arrears are rising, but there are steps you can take to regain control of your financial situation. Acting early, seeking professional advice, and exploring available lender support options can help you avoid further challenges down the line.
If you’re unsure about your next steps, contact us today on 0808 149 8381 or enquire online. Our expert advisers can help you find the best solution, whether that be remortgaging, debt consolidation, a product transfer, or reviewing your protection options.
Category:Nicholas Mendes
