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Homeowner and BTL mortgage arrears tick up in Q4 – UK Finance

  • 08/02/2024
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Homeowner and BTL mortgage arrears tick up in Q4 – UK Finance
Mortgage arrears among homeowners and buy-to-let (BTL) borrowers rose on both an annual and quarterly basis in Q4 2023, data from a trade body showed.

The UK Finance Mortgage Arrears and Possessions figures for the period revealed there were 93,680 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance. This was seven per cent higher than Q3. 

Compared to a year ago, this was a rise on the 75,170 homeowner mortgages in arrears. 

The largest annual increase was seen among homeowners in the lightest arrears band of 2.5 per cent to five per cent of the outstanding balance, with a jump of 9,550 mortgages. Compared to Q3, this was a five per cent rise. 


BTL arrears more than double 

In Q4, there were 13,570 BTL mortgages in arrears of at least 2.5 per cent or more of the outstanding balance, which was an 18 per cent jump on Q3. 

Annually, this represented a more-than-doubling of the 6,060 BTL mortgages in arrears at the end of 2022. 

Some 6,800 BTL mortgages were in the lightest arrears band, eight per cent higher than in Q3. Compared to the same period last year, this was a rise on 2,570 BTL mortgages in light arrears. 

Mortgages in arrears represent 1.07 per cent of all outstanding homeowner loans and 0.69 per cent of BTL mortgages in Q4. 

Mark Tosetti, group partnerships director at Movera, said: “Unfortunately, these figures show that mortgage arrears figures continued to climb over the last quarter, particularly for BTL properties. Landlords are having a particularly tough time. However, it’s good to see homeowner possessions falling.   

“Hopefully, over the current quarter, arrears and possessions levels will improve as confidence returns to the market as we seek positive indicators of interest rates looking to decrease in 2024. But we mustn’t forget that there are still many UK households who are yet to come off historically low fixed rates and onto higher rates.” 


Homeowner possessions down, BTL up 

The number of homeowner-mortgaged properties taken into possession totalled 540 in Q4 last year, which was 14 per cent down on Q3. This was also lower than the 570 properties seized during the same period in 2022. 

Some 500 BTL properties were taken into possession in Q4, an 11 per cent rise on the previous quarter. This was also higher than Q4 2022, when 320 BTL properties were seized. 

Simon Webb, managing director of capital markets and finance at LiveMore, said: “Consumer Duty is obviously working, as the number of homeowner-mortgaged properties taken into possession is down by a significant 14 per cent. However, the report clearly demonstrates that consumers are still struggling to make ends meet, with nearly 100,000 homeowners unable to pay their mortgages.  

“When we see figures like this, we need to be particularly mindful of our older generations who are trying to pay unusually high standard variable rates (SVRs) when in fact they could potentially get a new mortgage.” 

He added: “We surveyed more than 2,000 homeowners aged 50 to 90-plus and discovered that only four per cent of 50-plus-year-olds thought they could get a mortgage, which is outrageous. Later life lenders continue to widen their remit of affordability and the types of property they’ll lend against. We lenders and brokers need to let homeowners know this before they end up in these stressful situations.” 

Adam Oldfield, chief revenue officer at Phoebus Software, added: “While we’re seeing a disturbing volume of arrears among homeowners, the drop in possessions is more optimistic. We’re hoping that Q1 2024 will continue along this healthier path, as market sentiment seems to have turned a more positive corner since Q3 2023.

“That said, the level of arrears and possessions in the BTL sphere is a continuing concern for lenders, who are no doubt highly aware of the mood in Europe, where fallout from the struggling US property market has most recently hit Germany’s Deutsche PBB, whose bonds this week slumped over concern about the bank’s property exposure.”

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