Recent data from UK Finance Mortgage Arrears and Possessions has revealed that there were 87,930 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2023, 7% greater than in the previous quarter.
Within the total, there were 34,110 homeowner mortgages in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance). This was 10% greater than in the previous quarter.
There were 11,540 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2023, 29% greater than in the previous quarter. Within the total, there were 6,270 buy-to-let mortgages in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance). This was 33% greater than in the previous quarter.
What’s more, mortgages in arrears accounted for 0.93% of all homeowner mortgages outstanding, and 0.44% of all buy-to-let mortgages outstanding in the second quarter of 2023. 630 homeowner mortgaged properties were taken into possession in the third quarter of 2023, 9% fewer than in the previous quarter.
450 buy-to-let mortgaged properties were taken into possession in the third quarter of 2023, unchanged from the previous quarter. Commenting on the data, Arjan Verbeek, Founder & CEO, Perenna said:
“The increase in mortgage arrears and possessions highlights the current financial instability many homeowners are facing. The data underlines just how critical stability and predictability are when taking out your mortgage. The current options available aren’t fit for purpose in this volatile market and it’s time that lenders, regulators and governments come together to find a solution. If they don’t, we face creating a new generation of mortgage prisoners.
Long-term fixed rate mortgages offer borrowers a vital shield against economic fluctuations. In a climate where possession and arrears are on the rise, homeowners with fixed rate mortgages are better insulated from changes in interest rates. Homeowners can plan their budgets with confidence, knowing their mortgage payments will remain constant. Long-term fixed rate mortgages provide financial security and the much-needed peace of mind for homeowners to be able to weather the current economic storm.”
Adam Oldfield, chief revenue officer at Phoebus Software, said that the rate at which arrears is increasing is the “worrying statistic” that is “unlikely to fall in any time soon”. He continued:
“As worrying as this increase may be to many, the number of possessions fell. This shows the increased forbearance that lenders are showing to struggling borrowers.
When you consider that lenders had to stress test borrowers up to eight per cent for almost all of the mortgages in existence today, the question is why is this happening? The answer, unfortunately, is most likely that the ultra-low interest environment that we have experienced over the last few years has led to a level of complacency. The rising cost-of-living and higher interest rates has come as a massive shock to many and budgeting for higher costs is not something borrowers have had to do for a very long time. No-one, especially lenders, wants to repossess homes. It’s expensive, horribly upsetting and disruptive. So, lenders will again be looking to do everything they can to avoid taking more homes into possession in the coming months.”
