The growth rate of UK payment arrears slowed to 3.9% in the first quarter of 2024, from 5.7% in the fourth quarter of 2023, the lowest quarterly growth rate since the September 2022 Mini-Budget.
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This is according to the latest data from Pepper Advantage, a global credit information company, on its portfolio of more than 100,000 UK residential mortgages. The report shows that mortgage arrears growth slowed in the first quarter of 2024 to the lowest level since the fourth quarter of 2022, when the combined effects of the cost of living and the Mini-Budget began to impact UK household budgets.
Although the pace of payment arrears growth has slowed, the absolute rate of payment arrears remains at the highest level since 2008.
The North East and North West of England were the only UK regions to see an increase in the rate of growth in payment arrears, while the West Midlands and East Anglia showed the lowest growth rates of just 0.4% and 0.5% respectively.
The South East, South West and Greater London had the lowest absolute arrears in Britain, while the North East, North West and Yorkshire and Humberside had the highest.
Older age groups have the highest absolute payment arrears: homeowners aged 60 and over and 51-60 years had the first and second highest payment arrears respectively, followed by homeowners aged 41-50.
However, every age group experienced lower growth in payment arrears rates in the first quarter. This trend was particularly noticeable for mortgages of 31-40 year olds, which grew by only 0.1 percentage point quarter on quarter, possibly due to a combination of stabilizing inflation and healthy wage growth.
The percentage of residential mortgages for which a direct debit was rejected fell by 2.3% in the first quarter of 2024 compared to the fourth quarter of 2023. This is the first quarterly decline since the second quarter of 2023 and breaks the trend of an increase in GDR payments normally increase after the December holiday season.
Commenting on the findings, Aaron Milburn, managing director of Pepper Advantage UK, said: “While the slowing growth in payment arrears and lower rates of direct debit rejections are welcome news for lenders and borrowers, the picture remains complex and the overall level of payment arrears are still the same. highest since the 2008 financial crisis.”
“Slowing growth signals an increasingly resilient UK economy, as lower inflation and higher-than-expected wage growth ease pressure on household budgets in some areas. However, the disparity between regions and age groups shows that financial challenges are not evenly distributed.”
He added: “The first quarter data contains some hopeful indicators, but it is too early to say whether these trends will continue in the second quarter. Managers and lenders should be aware that some groups remain under pressure and are likely to require support for some time to come.”