According to UK Finance, there were 76,630 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first three months of the year. This is two per cent higher than the previous quarter.
Within that, 27,700, or around 36 per cent, were at the lightest arrears band between 2.5 and five per cent of the outstanding balance.
The report noted that this was a five per cent increase on the prior quarter.
UK Finance said there were 7,030 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter of this year, which it said was a 16 per cent rise on the previous quarter.
Out of that total nearly half, 3,420, were in the lightest arrears band of 2.5 or five per cent of the outstanding balance. This is a leap of a third compared to the prior quarter.
The report continued that 750 homeowner mortgaged properties were taken into possession in Q1 2023, which is up by 50 per cent compared to the previous quarter.
Around 410 buy-to-let mortgaged properties were taken into possession in the first quarter of this year, a rise of 28 per cent on the prior quarter.
Figures ‘crushing blow’ for FCA and BoE
Samuel Mather-Holgate of Mather and Murray Financial, said the data would “come as a crushing blow” to the Financial Conduct Authority and the Bank of England.
“If anyone was considering how the affordability stress tests worked, it is now abundantly clear they don’t when rates rise this quickly. Repossession is the final stage of a long process, and these rose by 50 per cent over the quarter. This unfortunately means there is more bad news to come.
“Considering the menial effect of higher interest rates on the type of inflation we have, the Bank of England should be ashamed of itself for creating the misery we are seeing and the crisis that is developing,” he added.
Justin Moy, founder at EHF Mortgages, agreed that the “data does not make good reading”.
“Some of this will be directly associated with higher mortgage rates, some will be the higher living costs that we are having to deal with. Mortgage lenders are legally obliged and genuinely wish to help borrowers who are in financial difficulty, and can put a variety of plans together to help in the short term, such as interest-only or lengthening the term,” he explained.
Moy added that a few of his clients with such challenges have been “very pleased and surprised when they have spoken to their lender”.
“None of us like to admit problems, but early action will make it much easier to remedy any situation. Don’t be afraid to speak with your adviser or lender if you are struggling,” he said.
Bob Singh, director of Chess Mortgages, said: “It’s no surprise that many families and landlords have succumbed to the relentless pressure of high costs of living and spiralling interest rates. With the Bank of England using its only tool of raising interest rates to control inflation, this is an unintended consequence of their actions placing further pressure on the government purse to rehouse the affected parties at a time when rents are at an all-time high and supply is low.
“The message here for those struggling is to take advice and communicate with lenders, who are very reasonable under these circumstances and repossession is often a last resort for them. Many lenders are missing out on the opportunity to design products and policies to help these borrowers.”
He said many lenders did not insist on income protection or life cover, so the “responsibility also falls on advisers to ensure the client takes out suitable redundancy/personal health insurance cover to ensure the income continues”.