The level of UK homeowners with mortgages in arrears jumped in the second quarter, new UK Finance data has indicated.

Figures published by the banking trade body revealed there were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q2, a total 7% greater than in the previous quarter.

Within this total, there were 30,940 homeowner mortgages in arrears between 2.5% and 5% of the outstanding balance, which was 12% greater than in Q1.

UK Finance also reported even greater increases in the buy-to-let (BTL) market. There were 8,980 BTL mortgages in arrears of 2.5% or more of the outstanding balance in Q2 – a figure 28% higher than in Q1 – and within this total, 4,810 BTL mortgages were between 2.5% and 5% of the outstanding balance, a 41% climb in comparison to Q1.

In total for Q2, mortgages in arrears accounted for 0.93% of all outstanding homeowner mortgages, and 0.44% of all outstanding BTL mortgages.

Chief revenue officer at Phoebus Software, Adam Oldfield, commented: “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.”

UK Finance also published figures for the number of mortgaged properties taking into possession, which showed there were 610 homeowner mortgaged properties repossessed in Q2, a figure representing a decrease compared to the previous quarter, by 19%. In the BTL market, 440 mortgaged properties were taking into possession in Q2, which was 7% more than Q1’s total.

“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,” Oldfield added.

“However, the level of arrears and possessions in the BTL 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.”

Senior personal finance analyst at interactive investor, Myron Jobson, added that the uptick in BTL arrears is a “worrying sign for the rental market”.

“With mortgage rates creeping higher in the current quarter, the worry is there will be a new wave of landlords facing financial strain in the near future when they remortgage,” Jobson said. “For many landlords, the uptick in mortgage costs is final straw after years of being squeezed by higher taxes.

“Landlords who are struggling financially due to mortgage arrears might try to offset their financial quagmire by raising the rent for their tenants. Mortgage arrears could also potentially lead to neglect of property maintenance or other issues that could reduce the quality of life for renters.

“Ultimately, if struggling landlords fail to keep on top of their finances, the rental property could be repossessed, forcing their tenant to find new accommodations, potentially at short notice, causing disruptions to their living arrangements and potential financial strain.”

Share Story: