Mortgages in arrears on the climb amid cost of living pressures

The number of homeowner and buy-to-let (BTL) mortgages in arrears has risen broadly in line with UK Finance forecasts for 2023, new data from the banking body has shown.

Possession figures have decreased 9% for homeowners and remained steady for buy-to-let (BTL) properties compared with the previous quarter.

Analysis by UK Finance revealed that the total number of homeowner mortgages in arrears is currently 1% of the outstanding mortgage stock, and 0.57% for BTL.

According to the figures, there were 87,930 homeowner mortgages in arrears in Q3 2023, 7% more than the previous quarter. The number of BTL mortgages in arrears was 11,540, a 29% increase during the same period.

UK Finance suggested the increases in arrears have been driven by the combined impact of both cost of living pressures and higher interest rates. In particular, interest rate pressures have been felt more acutely in the BTL sector, where landlords may not be able to raise rents to cover the increases in their payments.

The figures also showed that 630 homeowner mortgaged properties were taken into possession in Q3, 9% fewer than in the previous quarter. A total of 450 BTL mortgaged properties were taken into possession during the same period, unchanged from Q2.

Managing director of personal finance at UK Finance, Eric Leenders, said: “Anyone worried about making their mortgage payments should contact their bank as soon as they can. 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.”

Managing director of Target, Katie Pender, commented: “Unfortunately, these latest figures show that the rate of arrears has climbed steeply, particular for BTL mortgages. Given the increase in borrowing costs and the rising cost of living, these figures are not surprising.

“But there is some good news in that overall possessions seem to be on the decline. This could be because lenders are coping well and have implemented extensive forbearance measures, and lenders opting into the Mortgage Charter too.

“However, arrears figures show landlords are having a particularly tough time, largely because many are unable to offset mortgages costs when they are being hit by interest rate rises. As a result, some are leaving the market, with much needed rental properties disappearing.”

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