Arrears continues to rise in first quarter

UK Finance research has found that homeowner mortgage in arrears of 2.5% or more rose by 3% in the first quarter (Q1)of 2024, compared to the previous quarter, showing that the debt pressure for many homeowners remains acute. However, the rise year on year is substantial – there were 96,580 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter of 2024, compared to 76,680 in the first quarter of 2023.

The number of Buy To Let (BTL) properties in arrears remained the same as the previous quarter at 13,570.

The overall proportion of mortgages in arrears remains low, at 1.11 per cent of homeowner mortgages and 0.69 per cent of BTL mortgages.

Homeowner and BTL properties in early arrears fell by two per cent and 11 per cent respectively. In part, this reflects mortgages in this early band moving into deeper arrears positions. UK Finance says the data also points to fewer customers moving into this band and predicts a limited increase in arrears cases for Q2 2024.

For comparison, the number of homeowner and BTL mortgages in arrears in Q1 2009, the peak in arrears numbers during the global financial crisis, was 209,600 – almost twice the 110,150 seen in the first quarter of this year.

While the percentage of mortgaged properties taken into possession has risen, this is largely due to historic arrears cases now working through the court system.

Possessions numbers remain very low compared to historic norms. A total of 1,470 homeowner and BTL mortgaged properties were possessed in Q1 2024. This is 26 per cent lower than the 1,980 seen in Q1 2019, before the pandemic, and 89 per cent lower than the 13,200 seen in Q1 2009 – the peak of the previous possessions cycle during the financial crisis.

Lenders will always seek to ensure customers remain in their homes and possession is only ever a last resort after other options have been explored with the customer.

Lender stress tests continue to help ensure borrowers will be able to keep up with their mortgage payments, even if their interest rate rises above the rate in place when they first took out their mortgage.

Charles Roe, Director of Mortgages, UK Finance, said “The number of mortgages in arrears, while still low, continues to rise as households remain under pressure from the cost of living and higher interest rates.

“Lenders offer a range of support to anyone worried about their finances, with teams of trained experts ready to help. If you are struggling, please reach out to your lender as soon as possible to discuss the support options available.”