Households in arrears figures rise but remain at record lows

13th August 2021

Latest UK Finance figures show that mortgage arrears remained at record lows in the second quarter of 2021, with 1,370 fewer mortgages in arrears at the end of June compared to the end of March.

The number of mortgages in early arrears is below the level seen prior to the pandemic. Total mortgage arrears remain close to historically low levels due to the mitigating effects of the mortgage payment deferral scheme, alongside other tailored forbearance. There was a slight increase in the number of mortgages in more significant arrears

Overall, 76,270 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance. The low rate of arrears is largely down to the Financial Conduct Authority’s mortgage payment holiday, which was introduced in March 2020 and enabled borrowers to defer mortgage payments by up to six months during the pandemic.

Total mortgage arrears remain close to historically low levels due to the mitigating effects of payment deferrals and other tailored forbearance, as shown in the chart below. Early trends shows that arrears are moving on twin tracks; Covid-19 related support has helped customers to remain out of arrears but those in pre-pandemic financial difficulty have continued to build up arrears, notwithstanding the application of payment deferrals.

The payment holiday, which granted 2.9 million mortgage payment deferrals, came to an end last month.

The number of residential households in early arrears fell from 28,670 to 26,560 between Q2 2020 and Q2 2021 – or by just over 7%. Early arrears constitutes households in arrears of 2.5% to 5% of their balance.

The number of households in significant arrears – that is, those with arrears greater than 10% – however, rose during the same time period.

In Q2 2020, there were 24,060 households in this category. By Q2 2021, this number had grown to 27,910 – an increase of 16%.

Commenting on the figures Eric Leenders, Managing Director of Personal Finance at UK Finance, said “The mortgage payment deferral scheme continued to help customers throughout Q2 2021, resulting in a decline in early arrears on the previous quarter and lower levels than before the pandemic began.”

“The scheme has now come to an end and the majority of customers who used it have now returned to making regular payments. There is ongoing support for anyone who is still struggling, including tailored assistance and any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.”