Rise in UK borrowers falling behind on mortgage payments, says Santander

theguardian.com:

The boss of Santander UK says the bank is putting aside more money for potential defaults linked to the cost of living crisis after seeing a pickup in customers falling behind on mortgage and loan payments.

Mike Regnier told the Guardian that he was keeping a close eye on the “strain and pressure” facing customers as a result of the cost of living crisis, which has made it harder for some households to keep up with rising food and energy bills and financial commitments such as home loans.

That strain has been compounded by rising interest rates and economic uncertainty, which has resulted inhigher monthly payments for borrowers coming off of fixed-rate mortgages.

Santander, the UK’s fourth-biggest mortgage lender, will increase its standard variable rate by 0.25 percentage points to 6.24% from the start of November, and its two-year fixed-rate mortgages now command an interest rate of 6.04%.

“We’ve seen a very slight increase, but not yet a significant increase, in the number of customers who are falling behind on mortgage payments or … payments on cards, or loans or overdrafts,” Regnier said.

Santander has started contacting vulnerable customers, referring them to advisers, or having its own trained staff on standby. Its provisions could offset increases in its net interest margin, which is a key measure of profitability and accounts for the difference between what is charged for loans and paid out for deposits.

Santander UK has about 11% of the mortgage market, a book of £184bn of home loans as of July. It put aside £66m for potential defaults in the second quarter, up from £52m in the first three months of the year.

“Over the last two quarters, we have seen a small uptick in our net interest margin but we’ve also seen an