UK mortgage arrears rise as high interest rates hit borrowers – business live

The Ministry of Justice has also reported an increase in landlords trying to repossess their properties from tenants.

In July-September, landlord possession claims increased to 24,938 from 21,007 in Q3 2022 (a 19% increase year-on-year). Landlord possession orders rose 17%, from 15,350 to 17,977, while warrants – which permit a bailiff or High Court Enforcement Officer to execute an eviction – rose from 8,573 to 9,753 (14%).

Repossessions increased 11% from 5,464 to 6,080.

Angela Rayner, Labour’s deputy leader and Shadow Secretary of State for Levelling Up, Housing and Communities, is concerned by the data, saying:

“These figures lay bare the devastating impact of the Tories’ abject failure to tackle the housing crisis, with a toxic mix of rising rents and failure to end no-fault evictions hitting vulnerable people.

“The indefinite delay to the promised ban on no fault evictions comes at a heavy price for renters who have been let down by this Government for far too long already, with tens of thousands threatened with homelessness and facing visits from bailiffs.

“The next Labour Government will ban no fault evictions and put an end to the Tories’ housing emergency with our secure homes plan.”

New mortgage deal falls below 5% in ‘watershed moment’ for UK homeowners

Rupert Jones

In a relief for struggling home owners, a two-year fixed-rate mortgage priced at below 5% has gone on sale for the first time since early summer.

Mortgage brokers called Nationwide’s decision to launch the fixed deal, priced at 4.99%, a “watershed moment” that would give the property market a “shot in the arm”, as well as offering borrowers hope that things were heading in the right direction.

More here.

New figures from the Ministry of Justice show an increase in mortgage possession claims in the last quarter, as borrowers fail to meet their payments.

They show that compared to the same quarter in 2022, mortgage possession claims increased from 3,681 to 4,185 (14%), orders rose from 2,480 to 2,923 (18%), and warrants increased from 2,473 to 2,289 (7%).

However, repossessions by county court bailiffs decreased from 758 to 622 (18%).

This is a clear signal of the rising financial pressure on homeowners, says Charlotte Nixon, mortgage expert at Quilter:

Navigating through the financial headwinds of the current economic climate, homeowners and renters are confronting stark realities, with increasing legal actions reflecting a surge in housing insecurity.

Mortgage possession actions, indicative of lenders seeking to recover properties from borrowers who have fallen behind on payments, have escalated. Specifically, mortgage possession claims, which are initial filings by lenders to obtain court permission to foreclose on properties, increased by 14% to 4,185.

This uptick is a clear signal of the rising financial pressure on homeowners. Meanwhile, mortgage possession orders, the court’s judgment that lenders may proceed with foreclosure, have risen by 18% to 2,923, underscoring the gravity of the situation for those struggling to pay their mortgages.

However, in a contrasting trend, actual repossessions, have decreased by 18% to 622. This suggests some homeowners are finding ways to avert the final act of losing their homes, possibly through renegotiated payment arrangements or other forms of assistance. Potentially initiatives like the Mortgage Charter have helped to decrease repossessions providing a sliver of hope that there may be a growing cushion against the ultimate displacement from one’s home, despite the uptick in initial legal proceedings.

Newsflash: The number of mortgages in arrears has risen, partly fuelled by a jump in buy-to-let landlords falling behind on their payments.

Trade association UK Finance has reported that there were 87,930 homeowner mortgages in arrears of at least 2.5% of their outstanding balance, in the third quarter of this year.

That’s a 7% increase compared to April-June 2023, and shows that some households aren’t able to meet their mortgage payments following the steady increase in UK interest rates since the end of 2021.

The number of homeowners in the ‘lighest arrears’ (ie, behind on between 2.5% and 5% of their balance) rose by 10% in the quarter.

UK Finance also reports that the number of buy-to-let mortgages in arrears has jumped by 29% in the last quarter, with 11,540 BTL mortgages in arrears of 2.5% or more in July-September.

That’s twice as many as in the third quarter of 2022, a year ago.

UK Finance also report that 630 homeowner mortgaged properties were taken into possession in the third quarter of 2023, 9% fewer than in the previous quarter.

450 buy-to-let mortgaged properties were taken into possession in the last quarter, unchanged from the previous quarter.

Dan Osman, Head of Later Life Lending (for those aged 55 or more) at UK Moneyman, says some banks are failing to show compassion to borrowers.

This data sadly shows how the walls are increasingly closing in on many borrowers.

In cases reminiscent of 2008, we are seeing a lot of older borrowers coming to us because they are under threat of repossession. The lack of compassion shown by some of the major banks is staggering.

When challenged, some will admit to not having offered any support to the vulnerable. This is especially true in the case of widows who may never have had any involvement in the household finances and are now being left to deal with things for the first time.

BoE’s Pill: Inflation will fall without interest rates rising higher

Phillip Inman

Inflation will fall without the need for further increases in the cost of borrowing, the Bank of England’s chief economist said this morning.

Huw Pill said the current level of interest rates would bring inflation back to the 2% target over the next three years, signalling that interest rates have peaked in the UK, my colleague Phillip Inman reports.

But he warned that wage increases were higher than the Bank would expect now that the economy was slowing towards stagnation. Services firms were also pushing prices higher despite a drop in demand, which meant interest rates would need to stay elevated for longer to achieve the inflation target.

In a presentation to the Institute of Chartered Accountants in England and Wales (ICAEW), Pill said:

“Having established monetary policy in restrictive territory, it’s not the case that we need to raise rates in order to bear down on inflation.

Sustaining rates at their current restrictive level will continue to bear down on inflation.”

Last week the BoE held interest rates at a 15-year high of 5.25%. The monetary policy committee, which sets interest rates, said there were no plans to cut the cost of borrowing while it focused on bringing down inflation.

Pill said the UK’s open economy could be buffeted by international events, as it had been over the last three years.

Pill explained:

“We need a persistent level of restriction over the next extended period … that’s not to say that’s a promise that we will deliver that type of interest rate profile.

“There’s no promise here and we are responsive to events. And every time we meet, we look at all events. Events in the Middle East are a clear focus at the moment for reasons that I think are obvious.

Official figures showed the consumer prices index stood at 6.7% in September, more than three time’s the BoE’s 2% target.

Pill said on Monday that betting by financial markets on a first interest rate cut in August 2024 “doesn’t seem totally unreasonable”. His comments prompted traders to buy UK government bonds, leading to a sharp fall in short-dated government bond yields on Tuesday.

BoE Governor Andrew Bailey said on Wednesday that it was too soon to talk about rate cuts.

The number of online job adverts placed by UK companies has dropped again, a sign that demand is weakening.

The Office for National Statistics has reported that the total number of online job adverts fell by 2% in the week to 3 November, compared with the previous week.

Of the 28 online job categories, 25 decreased, 1 category increased, and 2 remained unchanged, the ONS says.

The largest decreases were found in the “catering and hospitality”, “manufacturing” and “legal” categories, all decreasing by 6%. The only increase was in the “creative, design, arts and media” category, which rose by 1%.

On an annual basis, there were 7% fewer online job adverts than in the same week in 2022.

The worst may be over in the UK housing market, according to the latest poll of surveyors across the country.

The RICS Residential Property Monitor, released this morning, shows that demand and sales continued to fall in October. There was another drop in new buyers entering the market, and in sales, although both falls were less severe than in the summer.

Near-term sales expectations point to activity remaining subdued over the coming months, says RICS.

And prices continued to fall, although “the pace of decline appears to be leveling off”, RICS says.

Surveyors polled by RICS expect house prices to have fallen further in three months time, and in a year.

Sentiment on prices for the year ahead is most negative across the East Midlands, West Midlands and Yorkshire & the Humber.

RICS senior economist, Tarrant Parsons, says:

“Plenty of caution remains evident with respect to both buyer and seller activity across the UK housing market, albeit the latest survey feedback points to a slightly less negative picture than that reported over the previous few months.

“Although base interest rates have now been kept on hold at each of the past two MPC meetings, the Bank of England was keen to emphasise that monetary policy is set to stay at a restrictive setting for quite some time yet.

“As such, mortgage affordability will remain stretched over the near-term, leaving little prospect of a strong rebound in residential sales volumes, even if expectations have now moved away from cyclical lows”.

Emma Fildes, property agent at Brickweaver, has posted more details and analysis:

China’s fall into deflation last month is the latest data to confirm anaemic economic conditions in the country, says Kyle Rodda, senior financial market analyst at Capital.com.

The cause of the malaise is a subject of robust debate. Still, most agree it’s some combination of a confidence crisis, a cyclical slowdown, and structural problems related to pockets of leverage in the economy.

While policymakers have avoided the bazooka-style stimulus that drove China’s economy out of the 2008 slump and 2015 asset bubble, recent tweaks to monetary policy and a pledge of more profound deficit spending to achieve growth targets signal intent to boost economic activity. So far, the impacts have only been modest.

The insensitivity to policy support may throw wait behind the “balance sheet recession” argument for why China is stuck in such stagnation, a la the Japanese experience in the late 20th century.

Goldman Sachs have predicted that China’s headline CPI should rise gradually in the coming months, although “persistent pork prices deflation is likely to slow the pace”.

Bruce Pang, chief economist for Greater China at Jones Lang LaSalle, warned that “combating persistent disinflation amid weak demand remains a challenge for Chinese policymakers,” adding:

“An appropriate policy mix and more supportive measure are needed to prevent the economy from a downward drift in inflation expectations that could threaten business confidence and household spending.”

Newsflash: Britain’s energy regulator has fined six suppliers a total of £10.8m for missing their targets for smart meter installation last year.

British Gas, OVO, Bulb, E.ON, Scottish Power and SSE all missed their rollout targets, leading to a shortfall of 1,026,628 smart meters, Ofgem has announced.

The suppliers have all agreed to make payments into Ofgem’s Energy Industry Voluntary Redress Fund (EIVRF) – which is used to provide help to consumers in vulnerable situations who are most at risk from cold homes and high energy bills.

Cathryn Scott, director of Enforcement and Emerging Issues at Ofgem, said:

“The installation of smart meters is a vital step in the modernisation of our energy system and the path to net zero by 2050. Smart meters give customers better information about their energy usage helping them budget and control their costs.”

Some suppliers did cite “mitigating factors” for missing their targets, some of which Ofgem considered when setting their payments into the EIVRF, but didn’t hold a detailed review into what went wrong.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

China has dropped into deflationary territory for the second time this year, reigniting concerns over its economy.

Consumer prices in the world’s second-largest economy fell by 0.2%, compared with the previous year, in October, a larger decline than the 0.1% expected.

Chinese producers also cut their prices at a faster rate. The producer price index (a measure of prices at the factory gate) fell 2.6% year-on-year, following a 2.5% drop in September. That could push inflationary pressures down globally.

The drop in China’s CPI was partly due to cheaper food prices – pork, for example, cost 30% less than a year ago, with an oversupply of pigs and weak demand making this popular staple cheaper.

But there was also a notable slowdown in core inflation (stripping out food and energy), which fell to 0.6% in October from 0.8% in September.

While cheaper goods and services are welcome news for Chinese consumers, the fall in prices will worry Beijing, as it suggests economic demand remains weak almost a year after pandemic restrictions were ended.

Back in August, China’s inflation rate fell below zero, before returning to positive territory in October.

Deflation is a serious situation – falling price levels lead to a rapid slowdown in economic activity as consumers cut spending and business invest less (on the logical grounds that it will be cheaper next year).

However, is a small drop in prices actually full-blown inflation?

Robert Carnell, ING’s regional head of research for the Asia-Pacific, argues that China is actually grappling with “low underlying inflation”.

Carnell says:

What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today’s data show is that it doesn’t take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.

If you want to use any term, “disinflation” would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand.

Carnell adds that the inflation report highlights the “hog cycle” – when pork prices are high, farmers hold back pigs from the market to expand their herds, leading to a glut, causing herd shrinkage, etc etc.

He says:

China is not experiencing “deflation” as most headlines attest. But its pork prices are undoubtedly much lower, good news for all except farmers probably

The agenda

• 8.10am GMT: European Central Bank chief economist Philip Lane speaks at the ECB Conference on Money Markets 2023 in Frankfurt, Germany

• 9am GMT: ECB economic bulletin released

• 11am GMT: Ireland’s consumer price inflation data released

• 1.30pm GMT: US weekly jobless report