Key Findings

• Following a year of near historic lows, data point to a modest rise in mortgage arrears – a trend we expect to continue throughout 2023. In contrast to previous cycles, cost pressures, rather than unemployment, look to be the main drivers of arrears through this period.
• Rising interest rates have been a significant factor driving arrears amongst customers on variable rates, who make up the majority of more material arrears cases. However, many would see limited or no reduction in payment if they moved to rates currently available to new borrowers.
• Refinancing rate shock does not, at this stage, appear to be driving arrears for customers on fixed rates. Rather, it is cost-of-living pressures that appear to be impacting negatively on these customers’ ability to pay.
• Customers newly entering arrears last year appear to have lower incomes than those who were already behind, further supporting the finding that cost-of-living pressures, which affect lower income households more acutely, are contributing to new mortgage arrears.
• The differences between discrete cohorts of customers in arrears reinforce the need for a tailored, rather than one size fits all, approach to helping those struggling in the current environment.