Mortgage arrears remain at historic lows

Michael Lloyd

November 8, 2018

There were 3% more buy-to-let mortgages in significant arrears of more than 10% in the third quarter of 2018 year-on-year, UK Finance’s Mortgage Arrears and Possessions Update has found.

However the number of buy-to-let mortgages in arrears of more than 2.5% fell by 1% year-on-year..

Mark Pilling, managing director at Spicerhaart Corporate Sales, who deal with arrears and repossessions on behalf of lenders, said: “These figures suggest that the problems with Universal Credit are now really starting to impact landlords.

“Last month, the Residential Landlord Association revealed that 61% of landlords with tenants receiving Universal Credit have had problems with non-payment and arrears, and on average, these tenants owe 49% more than they did a year ago.

“Universal Credit has been plagued by problems since it was introduced, and while the government announced in the Budget that more money will be dedicated to the new welfare system, it is clear that much of the damage has already been done.

“Many claimants experienced huge delays in receiving their money, forcing them into arrears, and many are receiving far less than they did with the old system, which means in many cases, they simply do not have enough money to pay their rent on their reduced incomes.

“From a lenders point of view, it is important that they keep a close eye on their buy-to-let customers who have tenants who are on or are soon to be moved onto Universal Credit so they are able to work out the best solution for those who are struggling so that repossession is a last resort.”

Some 1,080 homeowner mortgaged properties were taken into possession in the third quarter of 2018, 19% fewer than in the same quarter of the previous year.

There were 500 buy-to-let mortgaged properties were taken into possession in the third quarter of 2018, 17% fewer year-on-year.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “It is good to note fewer homeowners are in arrears but the number in more serious debt, especially buy-to-let investors, remains worryingly high.

“These findings reflect what we are seeing in our offices – that lenders are negotiating hard to avoid repossessions and forced sales, which is in no-one’s best interests while the market remains flat.

“But the figures don’t reflect the number of homeowners who remain trapped as mortgage prisoners, unable to switch lender or product, who could be contributing to a much more active housing market generally.”

There were 77,600 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2018, 5% fewer year-on-year.

Within the total, there were 24,090 homeowner mortgages with more significant arrears, representing 10% or more of the outstanding balance. This was unchanged from in the same quarter of the previous year.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “Encouragingly, mortgage arrears remain at historic lows.

“However, there is no room for complacency. Possessions may be declining but that can change and borrowers need to be prepared. We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.

“While interest rates remain low, despite two rate hikes in the past year, they could rise further. Borrowers must plan ahead and consider how they will cope if this happens. Fixed-rate mortgages give certainty and help with budgeting, while remaining competitively priced.

“It is also vital that borrowers keep their lender in the loop if they are struggling to pay their mortgage.”

Jackie Bennett, director of mortgages at UK Finance, said: “It is encouraging that homeowner arrears and repossessions remain at historically low levels, which shows the vast majority of borrowers continue to repay their mortgages in full and on time each month.

“We would always encourage anyone with concerns about making their mortgage repayments to contact their lender to discuss the advice and support available.”

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