Homeowner mortgages in arrears increased by 7% to 93,680 in Q4 of 2023, according to the latest data from UK Finance.
In addition, buy-to-let (BTL) mortgages in arrears also saw an increase during this period, rising by 18% to 13,570.
According to UK Finance, this increase in arrears was largely driven by the combined impact of cost-of-living pressures and higher interest rates.
Meanwhile, the number of possessions remained very low.
Across BTL and homeowner mortgaged properties, a total of 1,040 were repossessed in Q4 2023.
This compares with nearly 2,000 in Q4 2019 before the pandemic.
Eric Leenders, managing director of personal finance, UK Finance, said: “The number of mortgage holders in arrears, whilst still low, is continuing to rise as the cost-of-living and high interest rates take their toll on households.
“Importantly, help is available to anyone worried about their finances – please reach out to your lender as soon as possible to discuss the support options available.
“Lenders have teams of trained experts ready to help. Contacting your lender to find out what support is available won’t affect your credit score.”
Reaction:
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“It’s worrying to see mortgage arrears data continue to rise, and unfortunately, this is a direct consequence of higher mortgage rates, the cost of living crisis and, for many years, stagnating wages.
“Taken in context, the figures are still very low in relation to the past twenty years of data, so whilst this may be the canary in the mine, it’s not yet a crisis.
“However, anyone staring down the barrel of losing their home is a personal disaster for them and their family, and it will sadly have long-reaching consequences.”
Ben Perks, managing director at Orchard Financial Advisers:
“You have to ask to what extent is this data being impacted by a combination of the the Mortgage Charter and lenders being more lenient given current economic circumstances?
“The amount of mortgage possession claims has increased, which indicates payment arrears are on the rise, which is no surprise at all in the current climate.
“Covid, the cost-of-living crisis and rising interest rates have all taken their toll on people’s finances.
“The Mortgage Charter has given people options to reduce payment for six months, so the repossession figures may just be delayed.
“It will be interesting to watch these figures over the first quarter of 2024 to see what picture they start to paint, but that picture may not be pretty.”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management:
“Context is key when looking at statistics. After all, if one person was repossessed in 2022 and two people in 2023, that’s a 100% increase.
“According to the FCA figures for 2023 the total UK mortgage debt is £1,654.3 billion. Finder’s mortgage statistics show the average UK mortgage as £189,503.
“That means that the total number of mortgaged properties in the UK should be around 8.7 million homes.
“So, even with this increase only 1.23% of total UK mortgages are in arrears and from a macroeconomic viewpoint that’s a tiny amount.
“With interest rates having increased from their ultra-low levels, I don’t think anyone is surprised to see an upward tick in arrears as people’s fixed rates end and they are seeing sharp increases in repayments.
“There are always options though, so it’s important to reach out for help as soon as you can see an issue arising, either to your lender or to a broker, to explore the steps you could take to avoid going into arrears.”
Richard Jennings CeMAP, founder and managing director at Richard Jennings Mortgage Services:
“Whilst not surprising the % variances quarter on quarter do highlight just how real the cost of living crisis is to everyday people.
“I hope the government read beyond the headlines and actually see the impact their decisions are having on their public.
“Unless something is done to stimulate growth in real terms and reduce inflation further, I can only see these numbers growing, sadly. A 99% mortgage is not a solution to this”
Akhil Mair, director at Our Mortgage Broker:
“The latest data from UK Finance is in, and the numbers are grim: 93,680 homeowner mortgages are in arrears of 2.5% or more, up 7% from the previous quarter.
“Within that, 35,940 mortgages are in the lightest arrears band, a 5% increase.
“These figures, though not surprising, underscore the financial strain many homeowners face.
“As we confront these challenges head-on, let’s remain proactive in offering tailored solutions and unwavering support to our clients including the Government.”
Hannah Bashford, director at Model Financial Solutions:
“These statistics will be a stark reminder of the financial stress homeowners and landlords are still under.
“There is always going to be a lag with this data as there has been the mortgage charter and people will have been using their savings to keep making their repayments but as those savings dry up or the end of the six months nears people who are struggling may fall into arrears.
“We certainly haven’t seen the end of this and I fear there will be more to come.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“Consumer Duty is obviously working, as the number of homeowner-mortgaged properties taken into possession is down by a significant 14%.
“However, the report clearly demonstrates that consumers are still struggling to make ends meet, with nearly 100,000 homeowners unable to pay their mortgages.
“When we see figures like this, we need to be particularly mindful of our older generations who are trying to pay unusually high SVRs when in fact they could potentially get a new mortgage.
“We surveyed more than 2,000 homeowners aged 50 to 90 plus and discovered that only 4% of 50+ year olds thought they could get a mortgage, which is outrageous.
“Later life lenders continue to widen their remit of affordability and the types of property they’ll lend against.
“We lenders and brokers need to let homeowners know this before they end up in these stressful situations.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“While we’re seeing a disturbing volume of arrears among homeowners, the drop in possessions is more optimistic.
“We’re hoping that Q1 2024 will continue along this healthier path, as market sentiment seems to have turned a more positive corner since Q3 2023.
“That said, the level of arrears and possessions in the buy-to-let sphere is a continuing concern for lenders, who are no doubt highly aware of the mood in Europe, where fallout from the struggling US property market has most recently hit Germany’s Deutsche PBB, whose bonds this week slumped over concern about the bank’s property exposure.”
