UK Housing News
Bank of England Says Mortgage Defaults Are on the Rise, and Homeowners Agree
Eligible finds half-a-million mortgage holders are set to miss a payment in the next six months
Eligible’s co-founder, Zahra Hassan, calls for greater proactivity from lenders to detect vulnerable consumers
The Bank of England's Credit Conditions Survey for Q2 has found that lenders reported an increase in the default rate on secured loans to households, with an additional rise anticipated in Q3. Alongside these findings, national data from Eligible – the UK’s first platform used by banks to provide bespoke financial communication through AI – has revealed that 492,000 mortgage-holders are set to miss a payment in the next six months. This comes at a time when a majority of the top ten mortgage lenders are accounting for a 22% spike in mortgage defaults over the course of 2024. Experts have cited the rapid rise in mortgage rates, spurred on by the Bank of England’s consecutive interest rate hikes from March 2022 and August 2023 as the primary culprit behind the ongoing crisis of debt and default, with Eligible’s data revealing that a further 670,000 mortgage holders have already missed a payment in the past 12 months.
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Key Stats:
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492,000 mortgage holders are set to miss a payment in the next six months
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670,000 mortgage holders have already missed a payment in the past 12 months
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5,417,000 Brits cite mortgage payments as a significant cause of financial related stress
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1,340,000 Brits do not understand the terms of their mortgage – because they don’t communicate with their lender
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487,000 mortgage holders are about to default, but will not be supported by their lenders with options to restructure
On a more personal level, 5.4 million Brits have cited their mortgage as a significant cause of financial-related stress alongside a spiralling cost-of-living and burdensome energy bills. Eligible single out communication as a prominent factor contributing to the imminent mortgage-payment crisis, with their research indicating that 1.3 million Brits do not understand the terms of their mortgage due to the absence of a sophisticated two-way dialogue with their lender.
According to Eligible, the onus is increasingly shifting onto banks to provide tailored and proactive real-time communication with their customers. Developments in technology, particularly in the field of artificial intelligence, can be utilised by financial institutions to identify at-risk customers and generate personalised support adapted to their unique situation.
Zahra Hassan, co-founder of Eligible, comments:
"The fundamental problem is that mortgages are a financial product that customers take out only once every 3-5 years. This means that they aren’t regularly engaging with their mortgage and aren’t in the loop of what all their options are.
“In a broader sense, rising interest rates, coupled with increased energy and living costs, heighten vulnerability to default. However, the key factor that pushes someone from financial strain to actual default is their lack of awareness about the array of options that their bank could have offered to temporarily ease their financial burden, particularly on their largest financial obligation – their mortgage.
“What's needed – and what we’re doing at Eligible – is an active two-way dialogue, and AI-powered systems like Eligible facilitate this by initiating interactions with customers and monitoring their responses to gather insights. For instance, we proactively send educational content to customers to assess their anxiety levels and their understanding of their current financial products. Based on this information, we can fine-tune our approach by crafting more personalised educational content and adjusting our tone to be softer, supportive, and empathetic. This way, borrowers can better appreciate that lenders are here to assist them."
Zahra Hassan, co-founder
