Proportion of StepChange Scotland clients with mortgage arrears on the rise

New data from StepChange Scotland reveals that around one in five (19%) mortgaged clients were in mortgage arrears in the second quarter of this year, up from almost one in seven (15%) in the second quarter of 2022. This is alongside a year-on-year rise in the proportion of mortgaged clients, which is up from around one in eight (13%) to around one in seven (15%), revealing the tangible effect that rising interest rates are now having on clients’ debts in Scotland.^[1]

Meanwhile, a high proportion of clients contacting the charity continue to cite a rising cost of living increase as the main driver of their debt. Data covering April to June 2023 reveals 28% of new clients attribute a cost of living increase as their main reason for debt, which has risen by twelve percentage points year-on-year (Q2’22 = 16%).

The new figures also show a jump in the proportion of new clients who have both gas and electricity arrears, among those with a responsibility for paying this bill type – 36% of clients are in arrears with their gas bills in Q2, which has risen by nine percentage points year-on-year (Q2’22 = 27%). Similarly, 32% of new clients are in arrears with their electricity bills in Q2, compared to 27% during the same time period in 2022.

Commenting on the data, Sharon Bell, Head of StepChange Scotland, said:

“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. 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.

“Energy bills may now have dropped and are less of a burden on people’s finances during the warmer months, but the effect of a year of high prices has led to a build-up of unsustainable energy arrears for many. With the energy price cap still high compared to pre-2022, the winter risks fuelling more difficulty for financially vulnerable households.

“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.”