Number of homeowner mortgaged properties taken into possession also increased
The total number of customers in arrears with their mortgages has risen in the first quarter of 2023, the latest data from UK Finance has shown.
The trade body reported that there were 76,630 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first three months of the year – around 2% higher than in the previous quarter.
Of the 76,630 homeowner mortgages in arrears, 27,700 were homeowner mortgages in the lightest arrears band representing between 2.5% and 5%. This number was 5% greater than that of the previous quarter.
The latest UK Finance Arrears and Possessions data also found that there were 7,030 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in Q1 2023, 16% more than in Q4 2022.
Of this number, 3,420 buy-to-let mortgages were in the lightest arrears band – around 33% greater than in the previous quarter.
UK Finance revealed that from January to March this year, 750 homeowner mortgaged properties were taken into possession, which was 50% greater than in the last quarter of 2022.
The number of buy-to-let mortgaged properties taken into possession in the first quarter of 2023 was 410 – around 28% more than in Q4 2022.
“As the cost-of-living challenges persist, customers may find themselves struggling with a range of bills including their mortgage,” Lee Hopley, director of economic insight and research at UK Finance, said. “Lenders stand ready to help anyone who might be concerned about their repayments.”
Samuel Mather-Holgate, managing director at Swindon-based advisory firm Mather & Murray Financial, commented that the UK Finance data would come as “a crushing blow to the FCA and the Bank of England.”
“If anyone was considering how the affordability stress tests worked, it is now abundantly clear they don’t when rates rise this quickly,” he said. “Repossession is the final stage of a long process, and these rose by 50% over the quarter. This unfortunately means there is more bad news to come.
“Considering the menial effect of higher interest rates on the type of inflation we have, the Bank of England should be ashamed of itself for creating the misery we are seeing and the crisis that is developing.”
Bob Singh, director at Uxbridge-based mortgage broker Chess Mortgages, said that it was not surprising that many families and landlords had succumbed to the relentless pressure of high costs of living and spiralling interest rates.
“With the Bank of England using its only tool of raising interest rates to control inflation, this is an unintended consequence of their actions, placing further pressure on the government purse to rehouse the affected parties at a time when rents are at an all-time high and supply is low,” Singh said.
Adam Oldfield, chief revenue officer at Phoebus Software, agreed that the recent increases in interest rates had put many borrowers into a position they have never experienced before.
“The figures from UK Finance bear out the fact that increasing interest rates coupled with the rising cost-of-living is taking its toll,” he stated. “Unfortunately, with around 370,000 borrowers coming off fixed rate deals between April and June, the likelihood is that this trend will continue and is almost certainly going to get worse. This is especially true if, as many expect, the Bank of England continues to put the base rate up.”
Oldfield added that, once again, there would be a great responsibility for lenders to identify borrowers that may be getting into difficulty and manage the situation with care.
“With Consumer Duty rules coming into force at the end of July, that responsibility becomes more onerous, and every lender will need to ensure they have all their systems aligned to ensure the best outcomes for their borrowers,” he said.
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