The overall rate of mortgage arrears growth dropped to only 1.1% in Q2 2024, research by Pepper Advantage has revealed.
Pepper analysed its portfolio of more than 100,000 UK residential mortgages, and found the third consecutive quarterly decrease in the arrears growth rate across its portfolio, which fell from 5.7% in Q4 2023 to 3.9% in Q1 2024.
Buy-to-let (BTL) mortgages saw 10.9% quarterly growth in the arrears rate, suggesting landlords are struggling as fixed rate BTL mortgages expire and are refinanced onto higher rates.
BTL borrowers’ average loan size was 164% greater than that of the average residential borrower, exposing landlords to more significant monthly payment increases when they move to higher interest rates.
While the overall arrears environment showed signs of improvement, growth trends were distinct between Northern and Southern regions.
The North of England, Scotland, and the West Midlands continued to have the highest absolute arrears rates but were also the only regions to see a quarterly decline in arrears.
The North East, North West, Scotland, and Yorkshire and Humberside saw arrears rates drop 2.5%, 0.4%, 8.1% and 0.4%, respectively, while the West Midlands rate of arrears remained the same.
The South continued to have the lowest levels of absolute arrears but saw the highest rates of arrears growth.
The arrears rates for Greater London, the South East, South West, Wales, and East Anglia grew 6.0%, 3.4%, 3.2%, 1.5%, and 1.1%, respectively.
The East Midlands saw mild growth of 0.2%.
Aaron Milburn, UK managing director for Pepper Advantage, said: “So far this year, every quarter has shown gentle improvement in the mortgage market.
“Arrears rates for residential mortgages may have plateaued and new originations are climbing, despite persistently high interest rates.
“Data from the past three quarters suggests certain segments of the market are recovering while others lag behind.
“The buy-to-let market often attracts criticism but is a crucial part of the housing market that requires stable supply and demand.
“The uptick in BTL arrears reflects growing structural issues within the rental market as landlords struggle to keep up with higher costs – presenting potential risks not only to landlords’ finances but also rented housing supply more broadly.”
He added: “Overall, our latest data is cause for cautious optimism as the market appears to be turning a corner, but key segments such as BTL require attention given remaining pressures.”
