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Mortgage arrears soar 31%, says FSA

The Financial Services Authority has published its latest mortgage lending figures, showing a sharp increase in the number of mortgages in arrears.

With borrowers increasingly struggling to clear their arrears, the total number of loan accounts in arrears has been steadily increasing since early 2007. At the end of Q4 2008 there were 377,000 loan accounts in arrears, an increase of 36,000 or just over 10% since Q3 2008, and an increase of 31% on a year earlier.

While the number of new arrears cases had remained constant at around 54,000 each quarter since early 2007, the latest two quarters have shown sharp increases. Q3 2008 saw an increase of 10% to 60,000 cases, while results for Q4 2008 show an increase of 13% to 68,000 cases.

The proportion of the residential loan book that is in arrears, and hence not fully performing, rose to 3.37% at end Q4 2008, up 0.44% in the quarter and up 1.11% on a year earlier.

While the total value of outstanding loans is £1,200bn, an increase of 3.5% compared to a year earlier. But quarterly growth continues to slow, with a Q4 2008 increase of just 0.25%.

New lending peaked in Q3 2007 at £102bn before declining to £45bn in Q4 2008, leaving gross lending 26% lower in the quarter, and 48% lower than a year earlier.

Loans to borrowers with an impaired credit history represented just under 1% of new lending in Q4 2008, compared to 3.2% a year earlier.

The FSA definition of a reportable arrears case covers loans where the amount of actual arrears is 1.5% or more of the borrower’s current loan balance. For example if the loan balance is £100,000 and arrears on the loan amount to £1,500 or more, then it is a reportable arrears case for MLAR purposes.

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