Mortgages in arrears down 8% year-on-year

Michael Lloyd

August 9, 2018

home sales

There were 76,740 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the Q2 of 2018, 8% fewer year-on-year, UK Finance’s Mortgage Arrears and Possessions Update has found.

Within the total, there were 23,190 homeowner mortgages with arrears representing 10% or more of the outstanding balance. This was 4% fewer than in the same quarter of the previous year.

Steve Seal, director of sales and marketing, Bluestone Mortgages, said: “Mortgage arrears remain at record all-time lows, revealing the majority of borrowers are keeping on top of their finances. It will be interesting to see, though, if last week’s rate rise may influence the next set of results.

“For those who may have slipped into the red, arrears often stem from events such as an illness, accident or divorce.

“These borrowers, however, are not repeat offenders; and many show healthy financial records before and after.

“As an industry, we need to reassure those going through financial difficultly that there is help and access to specialist lending available, which will take these kinds of complexities into consideration.”

There were 4,440 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2018, 6% fewer than that of the same year.

Within the total, there were 1,080 buy-to-let mortgages with arrears representing 10%or more of the outstanding balance, 2% greater year-on-year.

Jackie Bennett, director of mortgages at UK Finance, said: “Arrears and possessions are at an all-time historic low since we first started collecting this data over 24 years ago.

“While this is positive, last week’s base rate rise coupled with the disappointing uptake of the Support for Mortgage Interest (SMI) loan could see arrears creeping up in the coming months.

“With well over 90% of new loans taken out at fixed rates, most recent borrowers will see no immediate impact from the Bank rate increase.

“However, anyone with concerns about managing their mortgage should contact their lender to discuss the advice and support available. Repossession is always a last resort.”

Some 1,060 homeowner mortgaged properties were taken into possession in the second quarter of 2018, 5% fewer than in the same quarter of the previous year.

Furthermore 520 buy-to-let mortgaged properties were taken into possession in Q2, 24% fewer year-on-year.

Kate Davies, executive director of Intermediary Mortgage Lenders Association (IMLA), said:  “We welcome the news that the figures for arrears and possessions continue to decline.

“These figures reflect both the considerable efforts made by lenders to treat borrowers in difficulty with forbearance, and the tighter affordability rules introduced by the financial services regulator, which has prevented some borrowers from over-stretching themselves and getting into difficulty with mortgage repayments.

“Last week’s base rate increase inevitably prompted speculation that arrears and possessions might begin to tick up once again.”

Davies added: “However, this data tells us that it is highly likely that the vast majority of households with a variable mortgage rate would still be able to cope if their lender passes on a small rate hike.

“Lenders are acutely aware that any change to mortgage rates, combined with the impact of rate rises on other loans, can put pressure on household debt.

“This underlines the importance of borrowers having access to suitable mortgage deals – which is why our members recently pledged to do more to help a minority of UK borrowers who are stuck on reversion rates.”

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