fbpx

UK Finance: Arrears down but repossessions up in Q2

Michael Lloyd

August 8, 2019

In Q2 there were 3% fewer homeowner mortgages in arrears compared to the same period of 2018, while 15% more homeowner mortgaged properties were taken into possession, UK Finance data showed.

There were 75,890 homeowner mortgages, 0.84% of all residential mortgages outstanding, in arrears of 2.5% or more of the outstanding balance in Q2, down 3% year-on-year.

Some 1,270 homeowner mortgaged properties were taken into possession in Q2, 15% more than in the same quarter of the previous year, but well below the levels seen between 2009 and 2014.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “Encouragingly, there has been a fall in the number of homeowners in mortgage arrears compared with the same quarter last year, as the vast majority of borrowers pay their mortgages in full and on time each month.

“This is perhaps not surprising when one considers how low interest rates are.

“However, there is no room for complacency. While interest rates remain at low levels, there is plenty of economic uncertainty and there is always a chance they could rise.

“Borrowers must plan ahead and consider how they would cope if this were to happen. Long-term fixed-rate mortgages continue to be popular as they are competitively priced and enable borrowers to gain certainty and help with budgeting.

“While the number of homeowners in mortgage arrears has fallen, the number of people repossessed rose by 15% compared with the same quarter last year.

“UK Finance put this down to a backlog of historical cases now being processed and confirms that these numbers are well below the higher levels seen between 2009 and 2014.

“That said, repossession is devastating and any borrowers struggling to repay their mortgage should keep their lender in the loop.

“Lenders are being flexible and showing forbearance but it is much easier and less stressful to come up with solutions early on than further down the line when options may be much more limited.”

There were 23,370 homeowner mortgages with more significant arrears, representing 10% or more of the outstanding balance on their mortgage, 2% lower than in the same quarter of 2018.

The slight increase in possessions has been driven in part by a backlog of historic cases which are being processed in line with the latest regulatory requirements.

Lenders continue to show flexibility to borrowers in financial difficulty and possession is always a last resort.

There were 4,660 buy-to-let mortgages, 0.24% of all buy-to-let mortgages outstanding, in arrears of 2.5% or more of the outstanding balance in Q2, 5% more than in the same quarter of the previous year.

Within the total, there were 1,200 buy-to-let mortgages with more significant arrears, representing 10% or more of the outstanding balance on the mortgage, up 12% year-on-year.

Although there have been some increases in buy-to-let arrears, these are small and from a low base.

Some 590 buy-to-let mortgaged properties were taken into possession in the second quarter of 2019, 2% more than in the same quarter of the previous year.

Mark Pilling, Spicerhaart Corporate Sales managing director, added: “The latest UK Finance figures show that while the number of homeowners in arrears remains historically low, properties taken into possession has increased by 15%.

“But I don’t think this is necessarily the sign of a reversal in the trend, it is more likely, as UK Finance suggests, to be as a result of a backlog of historic cases which have been taken into possession in Q2.

“Our experience shows that lenders continue to do all they can to help borrowers in difficulty with a range of solutions to assist them deal with the difficulties faced.

“There are some instances though where despite the assistance that a lender can provide, repossession becomes the most viable option and also the best customer outcome. Managing these cases as early as possible is in the best interest of all parties.

“It is therefore imperative that lenders identify those who are already having difficulties managing their mortgage or are likely to in the future, as early as possible so that they can find a solution before repossession becomes the only option.”


Sign up to our daily email