Landlords and homeowners mortgage arrears rises

10th November 2023

UK Finance has released its latest mortgage arrears and possessions for Quarter 3 (Q3) with figures indicating that residential mortgage arrears have increased by 18% and buy-to-let mortgages in arrears also rising by 29%. 

The latest data shows that there were 87,930 homeowner mortgages in arrears in Q3 2023, seven per cent more than the previous quarter. UK Finance says lenders will always seek to ensure customers remain in their homes and possession is only ever a last resort. 630 homeowner-mortgaged properties were taken into possession in the third quarter of 2023, nine per cent fewer than in the previous quarter.

The number of BTL mortgages in arrears was 11,540, a 29 per cent increase during the same period. The increases in arrears are driven by the combined impact of both cost-of-living pressures and higher interest rates. In particular, interest rate pressures are felt more acutely in the BTL sector, where landlords may not be able to raise rents to cover the increases in their payments. 450 BTL mortgaged properties were taken into possession during the same period, unchanged from Q2 2023.

For comparison, in Q3 2009 the number of homeowner and BTL mortgages in arrears was 207,200 – over twice the 99,480 seen last quarter. This reflects the benefits of lender stress tests carried out to ensure borrowers will be able to keep up with their mortgage payments, even if their interest rate rises above those in place when they first took out their mortgages.

Eric Leenders, Managing Director of Personal Finance, UK Finance, said “Anyone worried about making their mortgage payments should contact their bank as soon as they can. All lenders have teams of experts ready to help anyone struggling with their mortgage payments with tailored support. The sooner you get in touch, the more support options your lender will be able to offer. What’s more, reaching out to your bank to find out what support is available won’t affect your credit score.”

Katie Pender, Managing Director at Target said “Unfortunately, these latest figures show that the rate of arrears has climbed steeply, particular for buy-to let mortgages. Given the increase in borrowing costs and the rising cost of living, these figures are not surprising. But there is some good news in that overall possessions seem to be on the decline. This could be because lenders are coping well and have implemented extensive forbearance measures, and lenders opting into the Mortgage Charter too.”

“However, arrears figures show landlords are having a particularly tough time, largely because many are unable to offset mortgages costs when they are being hit by interest rate rises. As a result, some are leaving the market, with much-needed rental properties disappearing.”

“With the news every day of people not being able to get on the housing ladder or unable to afford rents, and a shortage of places for people to live, it’s time for a significant overhaul of how the market works. The Autumn Statement in a few weeks is an opportunity for much-needed Government intervention in what is an increasingly broken market. Whether the Chancellor will listen to calls from the industry is another matter.”

Sho Sugihara, CEO and Co-Founder of Fuse, said “Borrowers are heading into a hugely challenging period as we enter winter and household bills are likely to spike. Our research shows that a third of lenders (32%) are already reporting an increase in borrower defaults over the last 12 months – however the situation seems to only be worsening as a result of interest rates climbing steadily for months and dwindling household savings starting to run out. There is also a major issue with delivering effective support solutions when borrowers are struggling – over half of borrowers believe lenders need to offer much more support.”

“There are potentially millions across the UK who are at real risk of falling into long-term debt and being excluded from mainstream credit options. Lenders must ensure that they are fully utilising a wider range of insights to accurately analyse borrower affordability and vulnerability to help protect borrowers at a much earlier stage and offer personalised support to prevent arrears and defaults.”