THE impact of the cost of living crisis on homeowners has been laid bare as queries from Scots seeking help about mortgage payments soars by more than 1000% while new mortgage arrears and repossessions rise.

Citizens Advice Scotland has revealed "soaring demand" for advice as people struggle to pay their mortgage even before the latest interest rises emerged and warned the problems are likely to get worse.

Views of their webpage 'what to do if you can’t pay your mortgage’ has risen by 1,627% from June 2021 to June 2022.

Direct advice on mortgage arrears is up 10% from June to July 2022, and up 24% from 2021/22 to July 2022.

It comes as the trade association for the UK banking and financial services sector, said homeowner property repossessions increased by 5% over the three months since March.

Some 630 homeowner repossessions took place between April and June said the trade association.

It said that due to the possessions moratorium introduced during the pandemic which was lifted in April, customers in “long-term financial difficulty” and “unable to recover” were progressing to repossession of sale.

Repossessions were now “almost exclusively historic cases” that would have taken place in 2020 and 2021.

It also revealed that in the space of three months, 200 more households have been hit by early arrears - representing 2.5 per cent to 5 per cent of a loan. There are now 25,160 in early arrears, a 1% rise in the space of three months - although down 14% year-on-year.


UK Finance said the latest figures showed “early signs of pressure” on household finances because of the increasing cost of living.

It said that energy price rises and increased National Insurance contributions would begin to weigh more heavily from April onwards, They advised that customers who are facing financial difficulties should contact their lender early, "as they stand ready to help".

Some industry experts say it was the "calm before the storm" for the mortgage market.

Last week, interest rates went from 1.25% to 1.75% in a bid to curb soaring prices soaring prices with inflation predicted to peak at more than 13 per cent as gas prices soar. In November the base rate was at 0.1%.

It was the biggest single rise since 1995 and means interest rates are now at the highest level since January 2009.

According to Moneyfacts, after the latest Bank of England base interest rate rises, householders on a typical variable rate mortgage of £200,000 over 25 years will now pay £1189.07 a month rather than £1100.34 at the end of last year.

Around 200,000 Scots have a variable mortgage which fluctuates as it tracks the Bank of England base rate which is now at 1.75%. In November it was at 0.1%.

A further 100,000 people locked into fixed-rate mortgage deals which are estimated to be scheduled to end during 2022 in Scotland will also be hit by interest rates rises when negotiating a new deal. An estimated 180,000 more will expire next year.

According to Citizens Advice Scotland, views of their webpage 'schemes that can help you pay your mortgage’ has risen by 53% between June 2021 and June 2022. Views of their 'selling your home to pay your mortgage debts’ page rose by 81%.

CAS social justice senior policy officer Aoife Deery said: “We are seeing soaring demand online and across the CAB network from people struggling to pay their mortgage.

“This has been a growing problem for a while, with steady incremental increases in demand over the past year.

“The increase in interest rates last week coupled with the general impact of rising inflation risks supercharging this problem and we anticipate starting to see large groups of people unable to pay their mortgage.

“That can be a really scary prospect and people who are struggling with money should understand they aren’t on their own – the Citizens Advice network is here to help. Lenders legally have to treat you fairly and consider any request you make to change the way you pay your mortgage. They are expected to do everything they can to come to a payment arrangement and repossessing your home should be the last resort."

Meanwhile UK consumer credit growth in June accelerated at the fastest rate in three years as households fight to cope with the rising cost of living.

People borrowed an additional £1.8bn in consumer credit last month, up from a £900m increase in May, according to the latest Bank of England data.

With inflation at a 40-year high of 9.4%, experts said many households were using all forms of credit available to them to pay soaring food and utility bills.

Households loaded an extra £1bn on their credit cards, with another £800m on car dealership finance, personal loans and other consumer credit.

Kamini Patel, director of client analytics at Equifax UK, said of the UK Finance data: “It may not appear on the face of it to raise any alarm bells, but this is the calm before the storm for the mortgage market.

“Mortgage repayments are usually the last credit line that a borrower will fall behind on, and as we’re already seeing rising arrears in unsecured loans and credit cards, we expect to see this market follow close behind.”

Meanwhile, mortgage lenders have been blocking new applications from buyers amid a rise of demand as interest rates rise.

Coventry Building Society, Cambridge Building Society, Saffron Building Society, and Suffolk Building Society have are among those that have hit the pause button on new business after the hike in the base rate.

Suffolk Building Society said it had temporarily paused applications to clear its backlog.

It said: "The team is working hard to process its existing pipeline, with a view to getting all cases to offer and completion stages as quickly as possible."

Coventry Building Society will re-open applications from Friday August 12, after a temporary pause came into effect last Thursday (August 4).

Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: "We decided to pause activity so we could protect service levels to mortgage brokers and their customers.

"Brokers and their clients were able to send us product transfer and further advance applications and all applications that were already in progress with us are being processed."

Meanwhile state agent group Savills has raked in more than £1 billion in revenue this year despite residential sales being dragged down by rising interest rates and fewer houses coming onto the market.

The company – which has offices in more than 70 countries – reported an 11% increase in its group revenue in the first half of the year, bringing in £1.03 billion against £932.6 million in the same period last year.

But revenue from UK residential sales dipped by 8% to £95.8 million as demand for new homes far outpaced supply and higher interest rates pushed up the cost of mortgages for house buyers.

Savills said the rising cost of debt has begun to drag down house price growth after asking prices soared following the pandemic.

According to UK Finance, despite the recent interest rate hikes, the overall number of customers in arrears with their mortgages continued to fall in the second quarter of 2022.

Some 74,540 homeowner mortgages were in arrears representing 2.5% or more of the outstanding balance, which was 2% down on the previous quarter and 10% down on a year earlier.