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Fitch improves pre-Budget mortgage arrears and house price forecasts

  • 31/03/2021
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Fitch improves pre-Budget mortgage arrears and house price forecasts
Ratings agency Fitch has revised down its forecasts for the level of mortgage arrears borrowers are expected to incur when the government’s Covid-19 relief measures end this year.


Mortgage arrears are now predicted to rise between one per cent and two per cent by the end of the year, compared to the agency’s original forecasts of 1.5 per cent and 2.5 per cent, made before the March Budget.

In its latest report, Fitch said following the extension of the Coronavirus Job Retention Scheme and the self-employed income support scheme to the end of September, along with ongoing payment deferrals, housing arrears have remained historically low.

But following the wind up of relief, arrears are expected to increase in the owner occupier and buy-to-let sectors.

In UK Finance’s quarter four arrears update, the trade body reported that the number of homeowners in significant mortgage arrears of 10 per cent or more of the outstanding balance rose 1,800 to 26,660.

UK Finance said this was driven by borrowers who were already behind in payments before the pandemic but had already made full use of the six-month payment deferral.


House price resilience

Fitch also expects the outlook for house prices to be more resilient that its pre-Budget forecasts after it was announced the stamp duty holiday would be extended until June.

Tapering of the tax relief will coincide with expected rising unemployment and falling incomes which will drive prices down later this year.

Instead of year-on-year house price falls of between four per cent and six per cent, however, Fitch now forecasts these will be between one per cent and three per cent.

The agency does not expect the 95 per cent mortgage guarantee scheme to have a material impact on prices.


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