Industry announced voluntary pause on mortgage possessions over the festive season

UK Finance said the mortgage industry announced a voluntary pause on possession activity over the festive season, in its Household Finance Review for the fourth quarter of 2022, published in March 2023¹. The review also recorded 860 possessions in the quarter¹.

The pause was reported alongside a wider picture of pressure on household budgets. UK Finance said the market reaction to the September 2022 fiscal event, including a spike in mortgage interest rates, pushed consumer confidence indicators below their already depressed levels to the lowest level on record at the end of the third quarter¹. Confidence in the economy recovered only modestly in the fourth quarter and remained well below previous lows, while confidence in households' own financial position continued to decline¹.

On arrears, the review said unsecured debt stress indicators were stable, but headline mortgage arrears saw a modest increase as cost-of-living and interest rate rises began to feed through, although numbers were down compared with the end of 2021¹. UK Finance said it expected further increases in arrears through 2023 but, absent unexpected adverse shocks, expected numbers to peak at relatively low levels and well below previous cycle highs¹.

The review set out other pressures on borrowers. It said the Bank Rate increase in November of 0.75 percentage points was the largest since the late 1980s¹, and that a majority of the Monetary Policy Committee judged at its February 2023 meeting that a further 50 basis points, taking Bank Rate to 4 per cent, was necessary to get inflation sustainably back to target¹. It also reported that more than a third of new loans to movers had terms extending beyond 30 years, meaning the average mover would be well into their 70s before the loan was paid off, and that the rapid increase in mortgage terms showed no signs of slowing through the final quarter of 2022¹.

Why it matters for households

The pause applied to possession activity over the festive season only, and UK Finance gives no end date for it in the review¹. For households in arrears, the reported figures show a modest quarterly increase in headline mortgage arrears, with numbers still lower than at the end of 2021¹. UK Finance expects arrears to rise further during 2023 but to peak below previous cycle highs if no unexpected shocks occur¹.

The review also identifies groups facing changed costs. Around 1.8 million fixed rate mortgage deals are due to mature through 2023, and UK Finance said refinancing is likely to strengthen, with internal product transfers, which are not subject to affordability tests, expected to take a greater share¹. Borrowers choosing longer terms to reduce initial payments and meet affordability requirements are doing so against tighter affordability overall¹. On the wider economy, UK Finance reported four per cent growth in 2022 compared with 2021, but noted the economy was fractionally smaller in December 2022 than in the same month a year earlier¹.

What happens next

UK Finance said it expects further increases in arrears through 2023, peaking at relatively low levels and well below previous cycle highs in the absence of unexpected adverse shocks¹. It said refinancing activity is likely to strengthen further through 2023 as 1.8 million fixed rate deals expire¹. The Bank of England forecast GDP to fall by 0.5 per cent in 2023, with unemployment expected at around 4.3 per cent at the end of 2023¹. No end date for the possession pause, and no figures for possessions during the pause itself, have been reported¹.