A leading debt charity has called for government intervention to assist struggling households with rising mortgage repayments and energy bill arrears.
StepChange Scotland has reported an increase in the number of its clients who are behind on their mortgage payments, revealing the "tangible effect that rising interest rates are now having on clients' debts". Nearly a third of new clients during the three months to the end of June attributed thier debt problems to the cost-of-living crisis.
The new figures also show a jump in the proportion of new clients who have both gas and electricity arrears.
READ MORE: The rising cost of UK mortgage repayments explained
Among those responsible for paying this type of bill, 36% were behind on gas payments in the second quarter of this year, up nine percentage points on the second quarter of 2022. Similarly, 32% of new clients were in arrears with electricity bills, compared to 27% during the same time period in 2022.
Sharon Bell, head of StepChange Scotland, said energy bills are less of a burden on people’s finances during the warmer months but the effect of a year of high prices has for many led to a build-up of unsustainable energy arrears. With the energy price cap still high compared to pre-2022, she warned that the coming winter risks fuelling more difficulty for financially vulnerable households.
“After thirteen consecutive interest rate rises, we are now beginning to see the proportion of new clients in Scotland with mortgage arrears creep up, which is concerning considering the wider cost of living pressures, and how many clients are also struggling with other types of debt," Ms Bell said.
"While a smaller proportion of our client base are home-owners, the rise this quarter indicates the immense pressure on mortgage holders’ finances, which will also extend to private renters as landlords seek to pass on increasing debt servicing costs."
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She added: “The UK and Scottish Governments must be ready to intervene with support for struggling households as the situation for mortgage holders and renters worsen, while lenders must be attuned to the difficulties people are facing – proactively identifying and offering support to customers who are falling into problem debt, while effectively signposting them to free debt and money advice.”
During the second quarter of this year, 19% of StepChange clients in Scotland who had a mortgage were behind on those payments, up from 15% in the second quarter of 2022. The charity also reported a year-on-year rise in the proportion of its clients with mortgages, up from 13% to 15%.
Meanwhile, 28% of new clients in the second quarter attribute cost-of-living pressures as their main reason for debt, up 12 percentage points on a year earlier.
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