Sharp rise in arrears and worse to come, mortgage lenders warn

There’s been a sharp rise in mortgage arrears as high interest rates have hit the housing market - and now there’s a warning of worse to come.

Data from the mortgage lenders trade body UK Finance shows that there were 81,900 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the second quarter of 2023, which was seven per cent greater than in the previous quarter.

Within that total, there were 30,940 homeowner mortgages in the lightest arrears band: this represents between 2.5 and 5.0 per cent of the outstanding balance. This was 12 per cent greater than in the previous quarter.

Mortgages in arrears accounted for 0.93 per cent of all homeowner mortgages outstanding: some 610 homeowner mortgaged properties were taken into possession in the second quarter of 2023, which is actually 19 per cent fewer than in the previous quarter.

The buy to let mortgage sector was more badly hit in the latest quarter.

There were 8,980 buy to let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the second quarter of 2023, which is 28 per cent leap on the previous quarter.

Within the BTL total, there were 4,810 buy to let mortgages in the lightest arrears band: this is representing between 2.5 and 5.0 per cent of the outstanding balance. This was a huge 41 per cent greater than in the previous quarter.

Some 440 BTL mortgaged properties were taken into possession in the second quarter of 2023, which shows a seven per cent rise on the previous quarter.

A UK Finance spokesperson says: “The number of mortgage holders in arrears rose in Q2 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 one per cent 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 Q2 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.”