The number of customers in arrears with their mortgages fell slightly in the fourth quarter of 2021, new UK Finance figures have revealed.

The trade body’s data showed there were 79,620 homeowner mortgages in arrears of 2.5% or more of the outstanding balance at the end of December, a reduction of 750 homeowner mortgages compared with the previous quarter. This is also 5% lower than the same period a year earlier.

Within this total, there were 26,850 homeowner mortgages in early arrears – those between 2.5 and 5% of balance in arrears – which was a decrease of 2% on the previous quarter and 14% fewer than the same period in 2020. These early arrears figures remain substantially lower than the numbers seen before the pandemic began. 

Also within the total, there were 30,010 homeowner mortgages with more significant arrears – those representing 10% or more of the outstanding balance – and this was 350 more cases than the previous quarter. However, this figure has risen, from a low base since Q1 2020, although UK Finance noted that the rate of increase has slowed.

The banking body warned that these customers, who were already in relatively deep arrears positions prior to the pandemic, will likely have made use of the full six months of COVID-19 payment deferrals scheme and would be equally likely to be receiving further support through lenders’ tailored forbearance options.

UK Finance also stated that possessions fell in the final three months of 2021, following a year of increases from a low base, helped by an industry moratorium on possessions over the festive period.

“It is encouraging to see that, at the end of a second year of economic and social upheaval, arrears have remained low and have in fact continued to trend down, even after the removal of government support for household incomes at the end of September,” commented UK Finance managing director of personal finance, Eric Leenders.

“The industry moratorium in December ensured that possessions remained suppressed through the fourth quarter. However, there remains a material backlog of possessions cases, dating back to before the pandemic, which will be resolved through this year. This will see possessions increase gradually through 2022 as this process is managed.”

Chief commercial officer at Target Group, Stuart Anderson, added: “Against the current backdrop of increased inflation and interest rates, and the subsequent hikes in everyday consumer prices, energy bills and mortgage payments, the chances are these pressures will combine to pile onto loan repayments – so these numbers are likely to rise.

“No doubt lenders are responding and forbearance and arrears management processes will be high on the agenda.

“The pandemic and these aftershocks have increased the complexity of  borrowers’ positions and additional support will be increasingly required to ensure repossessions remain at a relatively low level. Patience, efficiency and empathy will be the watchwords for the industry as the impact continues to unwind.”

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