Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment his Department has made of the potential impact of rising interest rates on the number of mortgage defaults across England.

The Government remains watchful for any emerging trends in light of rising interest rates; however, these will be based on arrears levels that are at historic lows: out of a total of 8.4 million residential mortgages, according to the latest UK Finance data, 74,560 were in arrears at the end of June, 10% fewer than in the same period in the previous year.

Interest rates are rising across the world as countries manage rising prices largely driven by the COVID-19 pandemic and Putin’s illegal invasion of Ukraine. As everyone’s financial situation is unique, the impact of these rate rises on individual households will vary. It is worth noting, however, that around 75% of residential mortgages are on a fixed rate and are therefore shielded from rate rises in the short term.

Nevertheless, the Government understands that people across the UK are worried about the cost of living, and are seeing their disposable incomes decrease as they spend more on the essentials. That is why we have announced £37 billion of support for the cost of living this financial year. In addition to the Energy Price Guarantee, millions of the most vulnerable households will receive £1,200 of support this year, with additional support for pensioners and those claiming disability benefits.

If mortgage borrowers do fall into financial difficulty, Financial Conduct Authority (FCA) guidance requires firms to provide support through tailored forbearance options. The Government has also taken a number of measures aimed at helping people to avoid repossession, including Support for Mortgage Interest loans for those in receipt of an income-related benefit, and protection in the courts through the Pre-Action Protocol, which makes it clear that repossession must always be the last resort for lenders.