Homeowner possessions rise but mortgage arrears fall

UK Finance has released its latest data on mortgage arrears and possessions for the final quarter of 2024 with the data showing a rise in housing possession and a slight fall in the total number of homeowner mortgages in arrears.

Possession numbers have risen significantly in percentage terms since the artificially low numbers through the pandemic, they remain very low by historic comparisons. The 6,440 possessions taken through 2024 were 20 per cent lower than the average seen in the five years before 2020 and 87 per cent below the previous peak seen in 2009.

Although 1,030 homeowner mortgaged properties were taken into possession in the fourth quarter of 2024, 12 per cent greater than in the previous quarter, the numbers remain significantly less than the long-term average.

There were 92,170 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2024, 2 per cent fewer than in the previous quarter. Within the total, there were 31,720 homeowner mortgages in the lightest arrears band (representing between 2.5 and 5 per cent of the outstanding balance). This was 3 per cent fewer than in the previous quarter.

There were 12,610 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2024, 3 per cent fewer than in the previous quarter. Within the total, there were 4,810 buy-to-let mortgages in the lightest arrears band (representing between 2.5 and 5 per cent of the outstanding balance). This was 5 per cent fewer than in the previous quarter.

Mortgages in arrears accounted for 1.06 per cent of all homeowner mortgages outstanding, and 0.65 per cent of all buy-to-let mortgages outstanding in the fourth quarter of 2024.

Commenting in the figures, Richard Lane, Chief Client Officer at StepChange Debt Charity, said “The decline in UK homeowner mortgages in arrears, coupled with the expected drop in interest rates today, offers some reassurance for homeowners. Yet the effect of high rates and wider cost of living pressures has had a serious impact on some households. Our data shows a huge jump in the average amount of mortgage arrears new StepChange clients are presenting with, which will make their debt problems much more difficult to overcome. For these mortgage holders the problem is acute, and with interest rates not expected to decrease as rapidly as they increased, more households are at risk of long-term financial hardship.”

Melanie Spencer sales and growth lead at Target Group, said “Last quarter, the volume of arrears cases was falling and they’re still going in the right direction.  With the UK set for a series of base rate cuts this year, borrowing pressures should ease.  Increased government spending announced at the October budget should also drive growth supporting borrowers.  Theoretically, cases should reduce.

“But we need to temper than with the news from the wider economy. RICS says housebuilders are doing less work than they were a few months ago.  And the UK private sector economy expanded more slowly in last month as businesses laid off staff at the quickest rate since the 2008 global financial crisis.  Rising unemployment will inevitably mean owner-occupiers and getting into arrears.  Landlords aren’t immune from these shocks either – this week Grainger reported rents are rising at almost half the pace they were this time last year.

“This all points to borrowers needing more support from lenders.  They will need the right systems in place to manage this process proactively, provide a much-needed resolutions for cases, and fall back on possessions only as a last resort.  Early contact and remediation is essential to improve outcomes for all parties.”

David Miller, Divisional Director at Spicerhaart Corporate Sales, said “We can be really encouraged by the fact that the number of arrears cases is decreasing, both on a quarterly and annual basis. While this is true for the lower arrears bands, numbers in the highest arrears band only continues to grow, which is likely to contribute to the rise in possessions. While perhaps with fewer options in terms of refinancing, they are certainly the ones that need the greatest support from lenders.

“Given the FCA’s recent communications with mortgage intermediaries, it’s abundantly clear that Consumer Duty remains their priority, along with minimising potential harm and poor outcomes – particularly for vulnerable customers. With all of financial services facing this same remit, it’s never been more important for lenders to have options in place to support clients in difficulty and deliver positive outcomes, with an assisted sale scheme being a clear example.

“As demonstrated in today’s figures with possessions still making up a small proportion of cases, lenders continue to do all they can to ensure that this is the last resort that it should be. We’re definitely seeing all the hard work of lenders helping customers that accept support and that is demonstrated in today’s figures. Part of this comes from robust forbearance measures, as well as the availability of good technology and intelligence, and the right partners in the market to help build a proactive strategy to support clients in difficulty and assess the value and any potential risk found in a lender’s portfolio.”