Over 20% of sub-prime homeowners in the
UK have mortgage arrears of more than 30 days and 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.

Even 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.

These figures reveal the extent to which homeowners are struggling amid rising utility bills and increased fuel costs.

Over £13 billion of loans held by both prime and sub-prime borrowers are now in default in the
UK.

A raft of problems have been identified as problems in the UK mortgage market including 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. These 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. There is no end yet in sight to this problem.

Two high street lenders have reversed their recent rate cuts. Abbey has reversed cuts it made to mortgage rates two weeks ago and The Woolwich, the Barclays owned mortgage provider, has followed suit. 

The Abbey is raising rates on new fixed-rate deals by between 0.15% and 0.56% from 29 May while the Woolwich is putting up the cost of some new two-year fixed-rate deals sold through intermediaries by 0.1% and some 10-year fixed-rate deals by up to 0.3%.

Both Abbey and the Woolwich have blamed rising inter-bank borrowing costs, the key to mortgage rates, for the most recent changes.

Meanwhile, a survey shows that the average mortgage deal is now on offer for only 11 days, down from 30 days a year ago. In April, the average shelf life was down to just six days.

This suggests that people holding mortgage offers should make their decisions quickly, although without allowing themselves to be bounced into unsuitable deals.