Lenders need to keep a close eye on borrowers who have spread themselves too thin

The latest Mortgage Lenders and Administrators Statistics from the Bank of England show that arrears are down but the number of high LTVs are up as is high loan to income lending, Mark Pilling, Spicerhaart Corporate Sales managing director, says that lenders need to keep a close eye on borrowers who have spread themselves too thin: “The latest Mortgage Lenders and Administrators Statistics reveal that the proportion of total loans in arrears fell slightly on the quarter to £14.4bn while the proportion of total loan balances in arrears decreased from 1.0% – which it has held for some time – to 0.99%; the lowest since the series began in 2007.

“It is good news that arrears remain historically low – and in fact are continuing to fall – but these statistics do not necessarily mean that people are no longer experiencing financial difficulties. In fact, it is more a sign that lenders are doing all they can to help borrowers who are struggling to avoid arrears and repossessions.

“Another thing to note from these stats is that borrowers are taking out bigger and bigger loans. The number of mortgages with LTVs above 90% increased by 4.5% (compared to 3.3% a year earlier) the highest since 2017, while the proportion of lending to borrowers with high loan to income ratios (more than four times their salary for single incomes and three times for joint) rose to 45%.

“This suggests that many borrowers are stretching themselves too thin, and if and when rates do rise, they may start to struggle.

“It is therefore important that lenders to look at all the cases on their books and if they have concerns about borrowers who are already struggling or are likely to down the line, to speak to them sooner rather than later in order to look at possible options. We work closely with lenders to manage their arrears and repossessions, to find solutions that best suit them and their customers.”