BTL mortgages in arrears rise by more than a quarter
The total number of customers in arrears with their mortgages has increased by 7% in the second quarter of 2023 compared with the previous quarter, the latest data from UK Finance has revealed.
The trade body reported that there were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q2 2023.
Of this number, 30,940 homeowner mortgages were in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance.
The latest UK Finance Arrears and Possessions data also found that there were 8,980 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in Q2 2023, 28% higher than in the previous quarter. Within the total, there were 4,810 buy-to-let mortgages in the lightest arrears band.
Mortgages in arrears accounted for 0.93% of all homeowner mortgages outstanding, and 0.44% of all buy-to-let mortgages outstanding in the second quarter of this year.
UK Finance said 610 homeowner mortgaged properties were taken into possession in Q2, which is 19% fewer than in the previous quarter.
A total of 440 buy-to-let mortgaged properties were taken into possession from April to June this year, some 7% greater than in the previous quarter.
“Unfortunately, the increase in the number of mortgages in arrears is no real surprise given the increase in borrowing costs and the rising cost-of-living,” commented Adam Oldfield, chief revenue officer at Phoebus Software. “We have to hope that lenders have been preparing for this exact situation.
“However, the level of arrears and possessions in the buy-to-let sphere is worrying. The rising costs of rents in the private sector is well reported, so it has to be a concern to lenders that the number of landlords in arrears has increased by such a high percentage.”
Jamie Lennox, director at Dimora Mortgages, said the UK Finance data was “alarming and certainly heading in a direction we wouldn’t want to see.”
“The main concern is that this is only the tip of the iceberg,” he pointed out. “The data so far won’t have factored in the customer who will now be landing on the sky-high rates we’ve been experiencing in the past few weeks. The real damage is likely to unravel in 2024.”
Meanwhile, a spokesperson for UK Finance said that while any rise in arrears could be worrying, overall numbers remained low with less than 1% of homeowners and less than 0.5% 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 spokesperson added.
“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.”
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