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Mortgage arrears suppressed in Q1 with modest uptick recorded – UK Finance

  • 13/05/2021
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Mortgage arrears suppressed in Q1 with modest uptick recorded – UK Finance
Mortgage arrears saw small increases over the first quarter of the year but remained near historically low levels seen in Q4 2020, data from UK Finance shows.


The body said this was a “direct result” of financial support offered to borrowers during the pandemic.

The number of homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance rose by 230 to 77,640 quarter-to-quarter. Annually, this was a moderate increase of seven per cent. 

Within this total, 28,100 mortgages were in early arrears of between 2.5 and five per cent of the remaining balance, a decrease of one per cent on the previous quarter.  

In Q1 last year, there were 30,170 mortgages in the same level of arrears representing an annual seven per cent drop. UK Finance said the level of arrears at the time were due to payment difficulties faced by borrowers before support measures were brought in. 

Since then, deferred mortgage payments have allowed these borrowers to catch up with payments and prevented them from falling into deeper debt. 

This led to an overall decline in early homeowner arrears in 2020 and resulted in the low number seen in Q1 of this year. 

UK Finance said it expected the number of early arrears to go up as forbearance is withdrawn and the true economic impact of the pandemic becomes apparent.  


Buy-to-let arrears 

The number of buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance rose by 130 to 5,970 in Q1. 

This was up by 35 per cent compared to the first three months of 2020, where 4,420 buy-to-let mortgages were in arrears of more than 2.5 per cent. 

Again, the relatively low number was attributed to the support offered to borrowers by lenders. 


Possessions dampened with pandemic bans

With a moratorium on involuntary repossessions and evictions during the pandemic, just 190 homeowner mortgaged properties and 180 buy-to-let mortgaged properties were taken into possession in the first quarter of 2021.  

This was a quarterly rise of 40 and represented annual declines of 82 and 72 per cent respectively.

Although the Financial Conduct Authority (FCA) allowed firms to resume repossessions in November, lenders continued to pause possessions in line with the government’s ‘winter truce’ from December to January. 

The bailiff eviction ban on rental properties was also extended until 31 May. 

Possessions are expected to increase due to the backlog of cases that did not take place in 2020, UK Finance added.


Continued support essential 

Andrew Montlake, managing director of Coreco, said: “Lenders and landlords alike have, quite rightly, been patient throughout the pandemic as many people struggled with their businesses, were put on furlough pay or sadly lost their jobs. This is reflected in these very low figures. 

“As we start to emerge from the pandemic and all the various government support measures come to an end, there is, unfortunately, likely to be an increase in the number of repossessions. 

He added: “The hope is that lenders and landlords continue to maintain a degree of forbearance going forward and that any move to repossess a property or evict a tenant is very much a last resort. 

“Even when the pandemic technically ends, the financial problems many people will experience will only just be beginning.” 


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