UK homeowners fall behind with mortgage repayments

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by Kay Murchie

Over 20% of sub-prime homeowners in the UK have mortgage arrears of more than 30 days according to Standard and Poor’s first quarter report.

Standard and Poor’s Ratings Services’ total delinquency index rose to 21.73% in the first quarter of the year, compared with 19.41% in the previous quarter and 18.11% in the first quarter of last year.

Standard and Poor’s research also discovered that those sub-prime borrowers falling 90 days or more behind, rose to 10.6% from 8.81% in the previous quarter and 8.07% in the first quarter of 2007.

Standard & Poor surveyed just under £35 billion of sub-prime mortgage debt, around 80% of the total UK sub-prime market.

Furthermore, those with excellent credit histories are also facing difficult times. Delinquency rates among prime mortgage holders rose to 2.41% in the first quarter compared with 2.11% in the previous quarter.

The research reveals how much homeowners are struggling amid rising utility bills and increased fuel costs.

Standard and Poor’s research is the most detailed produced this year and gives a clear indication into the health of the UK’s mortgage market as over £13 billion of loans held by both prime and sub-prime borrowers are now in default.

The report highlights that a reduction in refinancing opportunities for borrowers, the large proportion of loans (around one quarter) due to revert from fixed or discount rates in the first half of 2008 into an environment of reduced credit availability, and the slowing economy, are likely to keep delinquency figures high for the foreseeable future.

Despite cuts in headline interest rates, lenders’ funding costs have remained elevated, which in turn has kept mortgage rates, and therefore payments, high, concluded the report.