A significant uptick in mortgage arrears has jolted the housing market, with experts sounding the alarm for potentially more distressing times on the horizon. Data provided by UK Finance, the mortgage lenders trade body, reveals a startling 81,900 homeowner mortgages were in arrears of 2.5 per cent or more of the outstanding balance during the second quarter of 2023, representing a seven per cent surge compared to the preceding quarter.
Within this distressing figure, 30,940 homeowner mortgages fell within the lighter arrears category, ranging between 2.5 and 5.0 per cent of the outstanding balance. This troubling statistic witnessed a 12 per cent increase compared to the previous quarter. This worrisome trend translates to mortgages in arrears making up 0.93 per cent of all outstanding homeowner mortgages. In a concerning move, 610 mortgaged properties faced possession during the second quarter, a seemingly lesser 19 per cent decline from the previous quarter.
Shockingly, the buy-to-let mortgage sector bore a heavier brunt in the latest quarter. The figures illustrate that 8,980 buy-to-let mortgages experienced arrears of 2.5 per cent or more of the outstanding balance during Q2 2023, marking a staggering 28 per cent surge from the previous quarter. Within this buy-to-let segment, there were 4,810 mortgages categorized in the lighter arrears band (2.5-5.0 per cent of the outstanding balance), representing a significant 41 per cent escalation from the prior quarter. Meanwhile, the number of buy-to-let properties repossessed during the same period totaled 440, showing a modest seven per cent increase from the previous quarter.
A spokesperson from UK Finance acknowledged the challenges faced by mortgage holders, citing the impact of elevated mortgage rates and the relentless cost of living pressures on households. However, despite the unsettling rise in arrears, it’s crucial to recognize that the overall numbers, at less than one per cent of homeowners and less than half a per cent of landlords, falling behind on their payments remain relatively low. Lenders have been proactive in anticipation of potential arrears, evidenced by the launch of the Mortgage Charter, which has already aided over 200,000 borrowers in restructuring their repayments before encountering financial hardship.
While the number of homeowner and buy-to-let possessions remains relatively close to historical lows, these numbers are expected to rise in line with market forecasts, given the ongoing challenges of the cost of living. Homeowners and landlords grappling with financial difficulties are reminded that support is readily available. Lenders encourage those who foresee mortgage payment difficulties to proactively reach out early to explore the available options, underscoring the importance of seeking assistance in challenging times.