Q4 mortgage data reveals residential arrears increase as borrowing costs rise unexpectedly

• Rate of residential arrears grows 2.4% after two consecutive quarters of decline
• Rate of Buy-to-Let arrears growth eases but overall level remains 38% higher than 2023

LONDON--(BUSINESS WIRE)--Pepper Advantage, a global credit intelligence company, today published the latest data on its portfolio of over 100,000 UK residential mortgages. The data reveals that in Q4 2024, the rate of arrears* for residential mortgages grew by 2.4% on Q3, following two consecutive quarters of decline.

The data, which consolidates and analyses data from across the UK, showed an overall increase in arrears growth across all products – fixed/variable rate residential and buy-to-let mortgages. Most notably, residential arrears are up 2.4% in Q4 after two consecutive quarters of decline.

Key findings across product areas include:

• Buy-to-Let: In Q4, Buy-to-Let (BTL) market arrears growth slowed from 9.7% to 1.5%. While growth is slowing, overall BTL arrears are up 38.1% since Q4 2023.
• Fixed rate arrears: The arrears rate for fixed rate mortgages grew 8.4%, marking the highest growth rate since Q1 2024, when it hit 10.1%.
• Variable arrears: The percentage of variable rate mortgages in arrears grew 2.3% -- also the highest growth rate in this group since Q1, when it was 3.9%.
• Origination: New originations** fell 9.2% in Q4 compared to Q3 2024. The quarter-on-quarter drop reflects a less active market during the holiday season, with new originations steady compared to the same period in 2023.

Regionally, the overall rate of arrears increased across the UK except for the East Midlands, North East and Scotland, where it declined quarter-on-quarter by 1.8%, 2.4% and 3.2%, respectively. All other regions saw their arrears rates grow by between 0.7% and 5.7%.

Fraser Gemmell, CEO of Pepper Advantage, said: “The three-month run-up to the holidays is often a challenging time for household finances as families balance higher spending with bills and mortgage repayments. For borrowers, these strains were accentuated in Q4 by unexpectedly higher borrowing costs, particularly as many cheaper fixed-term mortgages came to an end. These pressures have translated into a higher rate of arrears growth across the board.

“While arrears growth in some regions is abating, the overall level remains remarkably high across the borrower types, age, and product areas. Increasing house sales have captured headlines in recent weeks as buyers race to beat the stamp duty deadline, but this is not the whole picture. Inflationary pressures remain a key concern for many households and will likely persist for the foreseeable future. Supporting these households remains crucial.”

Pepper Advantage’s UK Credit Intelligence report is published quarterly. The full Q3 2024 report is available here and Q2 2024 report here.

*Mortgages in arrears are defined as those that are 30+ days delinquent in payment.

**Pepper Advantage manages organic origination for 10 UK originators, 80% of which are capital markets funded.

About Pepper Advantage

Pepper Advantage is a global credit intelligence company that offers a range of data led and credit management services via a technology platform that spans across Asia, Europe, and the United Kingdom. The company, with $55 billion (USD) assets under management, operates in multiple asset classes including residential and commercial mortgages, real estate, SME loans, asset financing and leasing, auto and consumer loans, credit cards, retail finance and BNPL, in addition to offering outsourced operational support services to both financial and non-financial clients. It helps investors, financial institutions, fintechs, and banks manage their credit portfolios, reducing the cost and complexities of systems and supporting new non-bank lending, with a particular focus on clients whose customers are underserved by traditional mainstream lenders.

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