There were 93,630 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2024, 3% fewer than in the previous quarter, data from UK Finance has revealed.
Within the total, there were 32,860 homeowner mortgages in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance.
This was 5% fewer than in the previous quarter.
There were 13,000 buy-to-let (BTL) mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2024, 4% fewer than in the previous quarter.
Within the total, there were 5,070 buy-to-let mortgages in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance – 10% fewer than in the previous quarter.
Mortgages in arrears accounted for 1.08% of all homeowner mortgages outstanding, and 0.67% of all BTL mortgages outstanding in the third quarter of 2024.
990 homeowner mortgaged properties were taken into possession in the third quarter of 2024, 1% greater than in the previous quarter.
710 buy-to-let mortgaged properties were taken into possession in the third quarter of 2024, unchanged from the previous quarter.
Reaction:
Josh Skelding, commercial director at Fignum:
“This consistency is encouraging and could signal the start of a downward trend, especially with inflation dropping to 1.7% last month – falling below the Bank of England’s target for the first time since 2021.
“Although many households are still battling with affordability challenges, today’s data hints that the weight of high rates and rising living costs is finally starting to lift.
“Although both homeowner and buy-to-let possessions have increased steadily this year, these numbers remain significantly lower than long-term averages, with a more positive outlook ahead as interest rates stabilise.
“However, there are still certain segments of the market who may need more support, and lenders must stay closely connected with their buy-to-let customers.
“Following last week’s Budget, landlords are now facing an immediate 2% increase in Stamp Duty on second home purchases, and while this is a difficult but manageable change, lenders need to engage with their landlord clients to address any financial concerns and offer support.”
Richard Pike, chief sales and marketing officer at Phoebus Software:
“These arrears and possessions figures are a very encouraging sign either that people are managing their finances better and coming to terms with slowing levels of inflation, or financial institutions are showing more forbearance in line with Consumer Duty and best customer outcomes. I suspect it’s a bit of both.
“These are a large improvement on the previous quarter’s figures, which saw an 8% increase on possessions of homeowner properties and a fairly high 13% increase in possessions of buy-to-lets.
“If we get a Base Rate cut later today, I think that the mortgage industry unusually, in recent times, will have another good reason to be positive in terms of both existing customer management and new business volumes.”
David Miller, divisional director at Spicerhaart Corporate Sales:
“It’s really positive to see the number of arrears cases falling almost across the board.
“Not only is a great sign of lenders acting early to support cases, it demonstrates the positive changes we’ve seen in the market – helping borrowers access products at a better price.
“Of course, attention will be on those in the highest arrears band of 10% or more, the only band to see a quarterly increase.
“With refinancing not always an option and customer vulnerability a clear concern, the hope is that lenders are already engaging with this growing cohort of customers.
“While options can become more limited in these higher bands, there are opportunities for good outcomes still available, particularly through the likes of an assisted sale scheme.
“Even with 33,000 borrowers in the highest arrears band, it’s still encouraging to see that just a fraction of those are being repossessed.
“With the right technology and market partners, along with robust forbearance measures, it’s certainly possible for repossession to remain a last resort and for both the lender and the borrower to still secure a positive outcome.”
Tom Cuppello, director, risk at Broadstone:
“While the data encouragingly points to a slight downturn in arrears over the last quarter, the significant increases across the past year point to the huge impact that prolonged high interest rates are having on mortgages.
“The Chancellor’s Autumn Budget on 30th October outlined the government’s ambitious borrowing agenda, leading the OBR to lift its mortgage rate forecast to a peak of 4.5% in 2027, where it is then expected to plateau for the following years.
“Compared to the OBRs March 2024 forecast, mortgage rates will now be around 0.3 percentage points higher on average over the forecast.”
“In the months ahead, this shift is likely to bring renewed financial challenges for many borrowers, particularly those transitioning from fixed rates on to higher payments.
“For lenders, this means preparing to support customers through a potentially challenging period as household budgets come under increased strain.
“Staying agile and prioritising borrower support will be essential, especially as the Government’s Mortgage Charter and the FCA’s Consumer Duty come into play.
“As economic conditions remain volatile, lenders have an opportunity to build resilience within their portfolios, ensuring they’re equipped to navigate future financial headwinds and continue meeting the needs of their customers.”
