There were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, 7% greater than in the previous quarter, according to UK Finance’s latest Arrears and Possessions report.
Within this total, the newly released data also found that there were 30,940 homeowner mortgages in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance).
This was a further 12% greater than in the previous quarter.
UK Finance also found that there were 8,980 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023.
Within the total, there were 4,810 buy-to-let mortgages in the lightest arrears band – 41% greater than in Q1.
Mortgages in arrears accounted for 0.93% of all homeowner mortgages outstanding, and 0.44% of all buy-to-let mortgages outstanding in the second quarter of 2023.
610 homeowner mortgaged properties were taken into possession in the second quarter of 2023, 19% fewer than in the previous quarter.
Additionally, 440 buy-to-let mortgaged properties were taken into possession in the second quarter of 2023.
A UK Finance spokesperson said: “The number of mortgage holders in arrears rose in Q2 as higher mortgage rates and the cost of living continued to weigh on households.
“Although any rise in arrears can be worrying, overall numbers remain low with less than one per cent of homeowners and less than half a per cent of landlords behind on their payments. Lenders have been preparing for any continuing increases in arrears, for example with the launch of the Mortgage Charter, and have already helped over 200,000 borrowers before they have got into financial difficulty by restructuring their repayments.
“The number of homeowner and buy-to-let possessions in Q2 remain close to historic lows but are expected to continue to rise in line with our mortgage market forecast given the ongoing cost of living challenges.
“It’s important for homeowners and landlords to remember that there is support available to anyone struggling with their finances. If you think you might have difficulty making your mortgage payments, reach out to your lender early to find out the options available.”
Reaction:
Adam Oldfield, chief revenue officer at Phoebus Software:
“Unfortunately, the increase in the number of mortgages in arrears is no real surprise given the increase in borrowing costs and the rising cost-of-living.
“We have to hope that lenders have been preparing for this exact situation. Looking at the number of homeowner mortgages taken into possession, which fell compared to the previous quarter, it looks as though that may be the case and lenders are showing an increased level of forbearance in this area.
“However, the level of arrears and possessions in the buy-to-let sphere is worrying. The rising costs of rents in the private sector is well reported, so it has to be a concern to lenders that the number of landlords in arrears has increased by such a high percentage.
“Landlords will no doubt come under the microscope again, so perhaps Michael Gove’s call for the EPC regulations to be delayed is a better idea than at first received.
“We all know how vital the rental sector is, especially when there are so many barriers to get onto the property ladder, so lenders will need to be talking to their landlord clients before the situation gets any worse.”
Joe Stallard, director and adviser at House and Holiday Home Mortgages:
“The struggles continue for landlords. In fact, it’s downright brutal.
“Though the numbers are still relatively small, the rise in properties being taken into possession is a worrying sign, even if not entirely surprising given recent legislation changes that have come down hard on landlords.
“We mustn’t forget the knock-on effect this has on tenants.
“Punishing landlords this harshly will reduce the amount of good quality rental property available, which will increase rents and competition for those that don’t want to, or can’t yet, buy.”
Riz Malik, founder and director at R3 Mortgages:
“It seems that an increasing number of buy-to-let landlords are encountering serious financial challenges.
“Beyond escalating borrowing expenses, unpaid rents stand as a significant factor.
“Moreover, when landlords aim to offload their properties, the timing couldn’t be less favourable in recent memory.
“Even at auctions, properties remain unsold. Regrettably, the mortgage charter offers no assistance to these landlords, despite their essential role in supplying housing in the private rental market.
“The surge in arrears was bound to happen and the outlook for many landlords is bleak.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“This is a sign of the times, and it’ll continue to get worse throughout 2024 as more than 1.4 million households will face remortgaging at much higher rates than anyone has been used to for well over a decade.
“You can’t jack up interest rates at the speed we’ve seen over the past 18 months and not cause households to sink below the waterline.
“Thankfully the Mortgage Charter will give some light relief for owner-occupiers, however the buy-to-let market seems to be dead in the water already.”
Graham Cox, founder at SelfEmployedMortgageHub.com:
“The increase in landlord repossessions is unsurprising, as many are highly leveraged and refinancing costs have soared.
“Some will have pushed up rents to compensate. However, increasing void periods and tenants in arrears due to the cost-of-living has left overexposed landlords in difficulty.”
Ranald Mitchell, director at Charwin Private Clients:
“Landlords are particularly exposed as, for the most part, they rely on rent receipts to meet their mortgage payments.
“Tenants are feeling the pain every step of the way amid the cost-of-living crisis and rent increases to meet landlords’ mortgage costs.
“This is the tip of the iceberg, and very likely worse will come. Landlords would be well served to contact their tenants to discuss their situations and keep communications open should things worsen.
“Mortgage arrears appear to be rising sharply, which again is unsurprising. Sadly, I feel this number will continue to rise as mortgage holders fail to adjust, plan or are simply unable to cope with the costs of living in their current homes.
“For those about to have their fixed rates expire, or are due to remortgage next year, get a budget planner out, look at income and expenditure and start planning now. As always, talk to a broker.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This research and data are showing that the hikes of Base Rate from the Bank of England are pushing more homeowners into arrears now that the impact of the rate increases is starting to trickle through as more borrowers come off their low fixed rates.
“Tenants struggling with keeping up with rent is no surprise given the challenges across all their household costs from food and energy meaning something has to give.
“Further challenges for landlords with their increased cost of buy-to-let mortgages and rent being missed by tenants.”
