Lenders anticipate rise in mortgage defaults

April 14, 2024 by Alan

Lenders

Mortgage lenders across the UK are anticipating a significant rise in the number of people who default on their payments, according to data featured in a new report.

This report from the fintech company Fuse examined the latest financial statements issued by 10 major UK lenders. It discovered that they have prepared for expected credit losses (ECLs) of more than £760 million during this financial year. By contrast the ECL figure for the last accounting year was £625 million, with much of the rise being down to expected defaults on mortgages.

Seven out of the 10 told the Fuse report that they had set aside over 10% more in ECL provision because they were expecting defaults to go up. Only one of the lenders that provided data for this report said that the amount they had set aside for ECL was less than that of the year before.

The co-founder and CEO of Fuse, Sho Sugihara, told FT Adviser that the anticipated rise in defaults was due to the increasing amounts that mortgage holders were having to pay per month. Then he went on to say that:

“In order to protect mortgage holders from defaults, it’s vital that lenders introduce more effective approaches to assess affordability and utilise the full range of data insights at their disposal.”

He concluded by pointing out that this would enable lenders to help borrowers before things reached that stage.

Independent advisors who have done CeMAP training courses can help negotiate with lenders on behalf of borrowers who are struggling and can help those eligible to negotiate new mortgage rates and terms.