Widespread increases in arrears are driven by macroeconomic factors, in particular: rising unemployment rates, which lead to a widespread loss of income; rising interest rates, which create a higher regular expense for borrowers; and falling housing prices, which can make it more difficult for borrowers who are behind on their payments to get out of arrears by selling their property.
While this is likely to lead to some increase in unemployment, the unemployment rate is expected to remain low by international standards. Third, in the housing market, increases in interest rates, which up to the middle of last year had risen from low levels, have clearly reduced the affordability of housing over the past two years.