Data from Pepper Advantage shows that UK residential mortgage arrears have fallen to their lowest levels since 2022, while buy-to-let (BTL) mortgage borrowing stress has increased.
The overall arrears rate grew by just 0.1% in Q3 2024, marking a 0.8% drop compared to Q2 2024.
However, BTL arrears rose nearly 10% quarter-on-quarter.
Key findings included that the percentage of mortgages in arrears remained low overall, with residential mortgages showing a continued decline.
The arrears rate for BTL mortgages rose by 9.7% in Q3.
The number of new BTL mortgages dropped 1.6% compared to the previous quarter and fell by 10.6% compared to the same time last year.
In residential lending, new mortgage originations fell by 7.6% in Q3 compared to the previous quarter, although the overall performance in 2024 remained better than in 2023.
Despite falling originations, there was a strong outlook for the final quarter, with decreasing interest rates and heightened activity in the housing market.
Direct Debit Rejections (DDRs), which indicate missed mortgage payments, showed a 1.9% increase in Q3 2024 for residential mortgages, while BTL mortgages experienced a 2.7% rise.
Regional analysis revealed declining arrears rates across many parts of the UK.
Aaron Milburn, UK managing director for Pepper Advantage, said: “Our latest data shows that 2024 has been a year of improvement for the UK mortgage market.
“The overall arrears rate for residential mortgages appears to have plateaued, with some regions such as the South West recording a pronounced decline in the rate of arrears.
“Alongside the encouraging arrears data, the number of new originations remains solid, with falling interest rates starting to have an impact.”
Milburn added: “Looking to 2025, the data also shows headwinds clearly remain and the signs of structural challenges in the buy-to-let market are cause for concern with a knock-on effect for renters.
“Private landlords with BTL mortgages continue to exit the market as they grapple with the entrenched higher rate environment and the potential for additional taxes, increasing supply-side pressures and pushing up rental prices.
“Time will tell whether this divergence develops into a wider trend, but we’ll be following the data closely as we continue to support borrowers through difficult circumstances.”
