Number of Scots with mortgage arrears soars as cost of living rises

The numbers seeking help over mortgage arrears has soared in a year, leading to new concerns of a growing number of Scots struggling to make ends meet with the threat of rises in interest rates.

According to Citizens Advice network data, between July and September this year, the network provided more than 600 pieces of advice in relation to mortgage arrears.

As a proportion of all advice, these queries increased by 38 per cent between this period and the same period in 2020/21.

CAS fears that demand for this type of advice could rise in 2022 as Covid protection measures such as furlough and mortgage payment holidays end, the cost of living increases through rising inflation and energy prices, and stagnant or falling incomes.

It comes less than two weeks after Britain’s biggest banks announced increases to mortgage interest rates following a Bank Rate rise, piling pressure on already squeezed households.

The Bank of England increased rates by 0.15 percentage points to 0.25% in an attempt to tackle surging inflation. Millions of borrowers on standard variable and tracker-rate mortgages will see their bills rise as a result.

Barclays, Halifax, Lloyds Bank, NatWest, Nationwide and Santander all said they would pass on the full increase to customers with loans that track the Base Rate. Smaller lenders TSB, Virgin Money and Coventry Building Society also followed suit. Collectively these lenders represent around 70pc of the British mortgage market.


Experts warned the move away from low rates could also signal the beginning of the end for Britain’s “frenzied” house price boom. Rapid property price growth has been thanks in part to low interest rates for more than a decade.

About two million households have some form of variable mortgage. The 850,000 borrowers on tracker-rate mortgages will see a £186 increase in their yearly repayments, according to UK Finance, the lender body, equivalent to £15.50 a month.

For the 1.1 million customers on standard variable rate mortgages, costs will jump by an average of £9.58 a month, or £115 a year.

CAS social justice senior policy officer Aoife Deery said: “The growing demand for mortgage arrears advice is concerning, and we want to help people access all the help they can.

“Mortgage-holders who claimed Universal Credit during the pandemic can only get help with housing costs nine months after they first start their claim. We expect this has contributed considerably to the increasing number of queries about mortgage arrears.

“There is a real risk that this number could grow as people face the end of payment protections, rising prices in the shops, and soaring energy bills alongside stagnant or falling incomes. Following the Bank of England’s decision to raise interest rates, some mortgage-holders may also see their monthly repayments rise.

“Lenders legally have to treat you fairly and consider any request you make to change the way you pay your mortgage. They are expected to do everything they can to come to a payment arrangement and repossessing your home should be the last resort.”

The latest figures from UK Finance shows that serious mortgage arrears – 10 per cent or more of the outstanding balance – grew by 70 cases compared to the previous quarter to 27,980.

Bank of England research from earlier in the year said that payment holidays had “provided significant support to borrowers” and mortgage borrowers.

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