Mortgages in arrears up again in Q3 – UK Finance

In a contrasting trend, number of actual repossessions falls

Mortgages in arrears up again in Q3 – UK Finance

The total number of homeowner mortgages in arrears has increased by 7% in the third quarter of this year compared with the previous quarter, the latest data from UK Finance has revealed.

The trade body reported that there were 87,930 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q3 2023.

Of this number, 34,110 homeowner mortgages were in the lightest arrears band representing between 2.5% and 5% of the outstanding balance.

The latest UK Finance Arrears and Possessions data also found that there were 11,540 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in Q3 2023, 29% higher than in the previous quarter. Within the total, there were 6,270 buy-to-let mortgages in the lightest arrears band.

Mortgages in arrears accounted for 1% of all homeowner mortgages outstanding, and 0.57% of all buy-to-let mortgages outstanding in the third quarter of this year.

UK Finance said 630 homeowner mortgaged properties were taken into possession in Q3, which is 9% fewer than in the previous quarter.

A total of 450 buy-to-let mortgaged properties were taken into possession from July to September this year, slightly higher than the 440 recorded from April to June.

“This data sadly shows how the walls are increasingly closing in on many borrowers,” commented Dan Osman, head of later life lending at UK Moneyman. “In cases reminiscent of 2008, we are seeing a lot of older borrowers coming to us because they are under threat of repossession.”  

Craig Fish, director at Lodestone Mortgages and Protection, agreed that the latest UK Finance data shows the immense strain many households are currently under.

“Landlords are having a particularly tough time of it, based on this evidence,” Fish said. “We are having more and more conversations with people who are experiencing rate shock. Households up and down the country are on a knife edge. Many are having to make adjustments to their mortgages to make them more affordable, such as extending the mortgage term.

“We are now starting to see lenders’ rates fall, and if this continues, especially at higher loan-to-values, it may be that fewer customers face difficulties going into 2024.”

Adam Oldfield, chief revenue officer at Phoebus Software, however, pointed out that while the increase in the number of mortgages in arrears was worrying, the UK Finance report also showed a decrease in the number of possessions.

“This shows the increased forbearance that lenders are showing to struggling borrowers,” he said. “No one, especially lenders, wants to repossess homes. It’s expensive, horribly upsetting, and disruptive. So, lenders will again be looking to do everything they can to avoid taking more homes into possession in the coming months.”

For Charlotte Nixon, mortgage expert at Quilter Financial Planning, repossessions decreasing may also suggest that some homeowners are finding ways to avert the final act of losing their homes, possibly through renegotiated payment arrangements or other forms of assistance.

“Potentially, initiatives like the Mortgage Charter have helped to decrease repossessions, providing a sliver of hope that there may be a growing cushion against the ultimate displacement from one’s home, despite the uptick in initial legal proceedings,” she said.

UK Finance, meanwhile, reminded homeowners and landlords to take advantage of the support available to individuals struggling with their finances.

“Anyone worried about making their mortgage payments should contact their bank as soon as they can,” advised Eric Leenders, managing director of personal finance at UK Finance. “All lenders have teams of experts ready to help anyone struggling with their mortgage payments with tailored support.

“The sooner you get in touch, the more support options your lender will be able to offer. What’s more, reaching out to your bank to find out what support is available won’t affect your credit score.”

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