Recent industry data has revealed a concerning spike in the number of properties falling behind on mortgage payments, raising worries about the stability of the housing market. The figures, released by UK Finance, indicate an 11% increase in repossessions of buy-to-let (BTL) properties, as cost of living pressures and higher interest rates continue to take a toll on borrowers.
During the final quarter of 2023, homeowner mortgages in arrears witnessed a 7% surge, reaching 93,680 compared to the previous quarter. Buy-to-let mortgages, lagging more than 2.5% behind the outstanding balance, experienced an even steeper increase of 18%.
While UK Finance reported a 14% decline in homeowner-mortgaged properties being taken into possession (540 properties) during the period, there was a contrasting rise to 500 in the BTL category. Despite these increases, UK Finance emphasized that the volumes remained low when compared to historical standards.
Separate figures from the Ministry of Justice revealed a 39% rise in mortgage possession claims to 4,384 over the three months, a 9% increase in orders being granted (2,702), and a 19% decrease in repossessions by county court bailiffs.
The surge in borrowing costs has been attributed to the Bank of England’s consecutive rate hikes initiated in December 2021 to address inflation concerns. However, the central bank has refrained from further rate hikes since the summer, with Governor Andrew Bailey suggesting a potential downward movement in the future.
Data from financial information service Moneyfacts indicated that average fixed-rate mortgage deals, covering both residential and BTL customers, remain above 5%, though they have eased from around 6.5% last summer.
UK Finance commented on the outlook for borrowing costs, stating, “In recent months, mortgage rates have been falling. This will help ease the payment shock for the 1.5 million homeowners and 230,000 BTL mortgage holders whose fixed-rate deals are due to end this year.”
Alastair Douglas, CEO of TotallyMoney, expressed concerns over the data, stating, “The latest figures show that more and more homeowners and landlords are falling into arrears, and we can expect the trend to continue as 1.7 million cheap fixed-rate deals come to an end this year.”
Douglas urged those facing financial challenges to contact their lenders promptly, emphasizing the potential impact on credit ratings and the need for banks to be proactive in providing support to avoid a potential mortgage and mental health crisis.
As the housing market navigates these challenges, stakeholders are closely monitoring the evolving situation, with attention on potential interventions to safeguard both homeowners and the broader economic landscape.