According to the latest arrears and possessions figures from UK Finance, homeowners in arrears of 2.5% or more of the outstanding balance came to 96,070, which is in line with the prior quarter.
Within that, there were 34,420 homeowner mortgages in the arrears band between 2.5% and 5% of the outstanding balance. This was 3% down on the previous quarter.
The report added that there were 13,570 buy-to-let (BTL) mortgages in arrears of 2.5% or more, which is 1% up on the previous quarter.
Within that figure, around 5,660 BTL mortgages were in the lightest arrears band, which is 6% down on the prior quarter.
Mortgages in arrears made up 1.1% of all homeowner mortgages and accounted for 0.69% of all BTL mortgages outstanding.
UK Finance said that the fall in earlier arrears could suggest that there will be a “limited increase” in arrears cases in the next quarter.
The report said: “However, the decrease also partly reflects some customers previously in early arrears moving into more serious arrears shortfalls.
“For comparison, the number of homeowner and buy-to-let mortgages in arrears in Q1 2009, the peak in arrears numbers during the global financial crisis, was 209,600 – almost twice the 109,650 seen in the first quarter of this year.”
Possessions on the rise but remain historically low
The report found that 980 homeowner-mortgaged properties were taken into possession in Q2, 8% higher than the prior quarter, and 710 BTL-mortgaged properties were possessed. The latter is 13% higher than the previous quarter.
UK Finance said that the rise in possessions was due to the HM Courts Service “increasing capacity to work through historic[al] arrears cases”, adding that it was “low compared to historic[al] norms”.
Charles Roe, director of mortgages at UK Finance, said: “The number of mortgages in arrears has remained broadly flat compared to the previous quarter, which is good news following recent increases. This reflects the fact that, while many households remain under pressure, the challenges of higher rates and the cost of living have begun to ease.
“However, we know that this will not be the case across all households, and lenders want to support anyone who might be struggling. Lenders offer a range of support to anyone worried about their finances. If you are worried about your finances, please reach out to your lender as soon as possible to discuss the support options available. Doing so won’t affect your credit score.”
Concern due to rise in late arrears
David Miller, divisional director at Spicerhaart Corporate Sales, said that while the overall number of arrears “remains unchanged”, it was encouraging to see arrears of up to 7.5% are falling.
“Of course, there is clear concern around those in late arrears (7.5% or above), which only continues to rise. This growing cohort of borrowers are the ones that urgently need to seek support and lenders must stay close to.
“The upward growth of late arrears will be [the] key driver in the rise in possessions, although it is positive to see they continue to account for a small proportion of the overall customers in arrears. It demonstrates that lenders are continuing to be proactive and proving that possessions remain a last resort,” he added.
Miller noted that with positive news around the base rate and interest rates more broadly, there was “no question lenders need to keep this proactive approach, ensuring they not only have forbearance measures in place, but the right technology and partners to take action long before possession to ensure a positive outcome for both the lender and borrower”.
Richard Pike, chief sales and marketing officer at Phoebus, said a 13% increase in possessions of BTLs in Q2 2024 “might come as a blow to some”.
“However, we can probably attribute a portion of this to the fallout from the previous high energy and general costs of living that have taken their toll on renters and landlords alike.
“Now that inflation and energy prices have dropped, and the market is so much more buoyant as we move through the second half of 2024, I would hope that the equivalent figures this time next year will look a lot more promising,” he said.
Pike added: “The 8% increase on possessions of homeowner properties can be similarly explained. Gladly, Consumer Duty rules will have helped a lot of homeowners avoid falling into this group, as the handful of lenders who might not have been so understanding during times of financial hardship are now obligated to help their borrowers as much as possible.”
