According to UK Finance figures, within the total figure there were 30,940 mortgages in the lightest arrears band, which is between 2.5 and five per cent of the outstanding balance. This is a 12 per cent increase on the prior quarter.
The report added that there were 8,980 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the second quarter. Around 28 per cent more than in the previous quarter.
UK Finance added that within that total there were 4,810 buy-to-let mortgages in the lightest arrears band, a rise of 41 per cent than in the previous quarter.
It continued that mortgages in arrears made up for 0.93 per cent of all homeowner mortgages outstanding, and 0.44 per cent of all buy-to-let mortgages outstanding in the second quarter of 2023.
‘Alarming’ rise in possessions
On the possessions side, there were 610 homeowner mortgaged properties taken into possession during the period, which is 19 per cent down on the previous quarter.
It continued that 440 buy-to-let mortgaged properties were taken into possession in the second quarter, seven per cent greater than the prior quarter.
Jamie Lennox, director at Dimora Mortgages, said that the data was “alarming and certainly heading in a direction we wouldn’t want to see”.
He continued: “The main concern is this is only the tip of the iceberg, The data so far won’t have factored in the customer who will now be landing on sky-high rates we’ve been experiencing in the last few weeks. With the real damage likely to unravel in 2024.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services, agreed that arrears figures will continue to get worse through 2024 as over 1.4 million households will face remortgaging at higher rates.
“You can’t jack up interest rates at the speed we’ve seen over the past 18 months and not cause households to sink below the waterline. Thankfully the Mortgage Charter will give some light relief for owner-occupiers, however the buy-to-let market seems to be dead in the water already,” he added.
Surge in buy-to-let arrears ‘bound to happen’
Riz Malik, founder and director at R3 Mortgages, said that growing number of buy-to-let landlords were “encountering serious financial challenges”.
Malik continued: “Beyond escalating borrowing expenses, unpaid rents stand as a significant factor. Moreover, when landlords aim to offload their properties, the timing couldn’t be less favourable in recent memory.
“Even at auctions, properties remain unsold. Regrettably, the Mortgage Charter offers no assistance to these landlords, despite their essential role in supplying housing in the private rental market. The surge in arrears was bound to happen and the outlook for many landlords is bleak.”
Joe Stallard, director and adviser at House and Holiday Home Mortgages said that the “struggles continue for landlords”.
“In fact, it’s downright brutal. Though the numbers are still relatively small, the rise in properties being taken into possession is a worrying sign, even if not entirely surprising given recent legislation changes that have come down hard on landlords.
“We mustn’t forget the knock-on effect this has on tenants. Punishing landlords this harshly will reduce the amount of good quality rental property available, which will increase rents and competition for those that don’t want to, or can’t yet, buy,” he added.