Mortgage arrears on the rise

11th August 2023

Latest data from UK Finance for Quarter 2 (Q2) has found that  arrears and possessions data shows that there were 81,900 homeowners in arrears of 2.5 per cent or more of their outstanding balance.

Mortgages in arrears accounted for 0.93 per cent of all homeowner mortgages outstanding. UK Finance predicts that this figure will remain below one per cent throughout 2023.

The figures also showed that a growing number of homeowners and landlords fell into arrears with their mortgage.

UK Finance also said that home repossessions are expected to rise, given ongoing cost-of-living challenges.

Mortgages in arrears was 7% higher than in the previous quarter. Within the total, 28,690 homeowners had arrears in the most severe band of more than 10% of the mortgage balance, which was up by 2% compared with the previous quarter.

There were 8,980 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, 28% higher than in the previous quarter.

610 homeowner mortgaged properties were repossessed in the second quarter of 2023, 19% fewer than in the previous quarter and nd 440 buy-to-let mortgaged properties were repossessed in the second quarter of 2023, which was 7% more than in the previous quarter.

A UK Finance spokesperson said “The number of mortgage holders in arrears rose in (the second quarter) as higher mortgage rates and the cost-of-living continued to weigh on households.”

“Although any rise in arrears can be worrying, overall numbers remain low with less than 1% of homeowners and less than half a per cent of landlords behind on their payments.”

“Lenders have been preparing for any continuing increases in arrears, for example with the launch of the mortgage charter, and have already helped over 200,000 borrowers before they have got into financial difficulty by restructuring their repayments.”

“The number of homeowner and buy-to-let possessions in (the second quarter) remain close to historic lows but are expected to continue to rise in line with our mortgage market forecast given the ongoing cost-of-living challenges.”

“It’s important for homeowners and landlords to remember that there is support available to anyone struggling with their finances. If you think you might have difficulty making your mortgage payments, reach out to your lender early to find out the options available.”

Richard Lane, StepChange Director of External Affairs said “It’s no surprise to see mortgage arrears and possession claims for mortgage holders continuing to rise. Our clients are telling us that they’re facing a perfect storm of rising costs and financial pressures.”

“We know when households face significant rises in costs, as many millions are right now, that people cut back on spending or turn to credit to keep up with essentials and the wider cost of living. For many, these coping strategies will be unsustainable and store up financial problems further down the road.”

“Protections brought in by government and mortgage lenders to mitigate the difficulties are welcome and will help to keep people in their homes over the coming months, but we would urge policy makers to monitor the situation closely and keep further inventions to support people who are struggling on the table if necessary.”

“It’s equally concerning to see the continued rise in the number of landlord possession claims on rented properties. The government must not ignore the impact of this crisis on private renters, who are facing unprecedented hikes in rent with little support in place for those who fall into financial difficulty. While a 12 month freeze on mortgage repossession has been instated, private sector tenants, who include families and people with vulnerabilities, have no such protections. The Renter’s (Reform) Bill needs to do more to recognise the intense financial pressure on private sector tenants and the support they – and landlords – need to help keep their homes.”