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Rise in Buy-to-Let Mortgage Arrears and Property Repossessions

In its latest update, UK Finance has released data on mortgage arrears and possessions for the fourth quarter of 2023, indicating a rise in the number of mortgages falling behind on payments. This increase aligns with the forecasts previously made by UK Finance regarding the mortgage market’s trajectory.

According to the report, homeowner mortgages in arrears have seen a 7% increase, reaching 93,680, while buy-to-let (BTL) mortgages in arrears have risen by 18% to 13,570, both in comparison to the previous quarter. Despite this increase in arrears, the number of properties repossessed in the homeowner category has declined by 14% to 540. Conversely, BTL property repossessions have risen by 11% to 500 in the same period.

UK Finance emphasises the availability of support for those struggling with mortgage payments, urging affected individuals to proactively engage with their lenders. It reassures borrowers that seeking advice on available options will not adversely affect their credit scores.

The observed increase in arrears is attributed to the combined pressures of rising living costs and higher interest rates. However, there is a silver lining as mortgage rates have begun to decrease, potentially alleviating the burden for the 1.5 million homeowners and 230,000 BTL mortgage holders facing the end of their fixed-rate deals this year.

The effectiveness of lender stress tests in ensuring borrowers’ resilience against interest rate hikes is also highlighted. Nonetheless, UK Finance acknowledges that external factors beyond lenders’ control can impact borrowers’ ability to meet payment obligations. Borrowers are therefore encouraged to contact their lenders early to explore tailored support options.

Eric Leenders, Managing Director of Personal Finance at UK Finance, commented on the situation, noting the continued rise in mortgage arrears due to the cost-of-living crisis and high-interest rates. He stressed the importance of reaching out to lenders for assistance, stating, “The number of mortgage holders in arrears, whilst still low, is continuing to rise… Importantly, help is available to anyone worried about their finances – please reach out to your lender as soon as possible to discuss the support options available. Lenders have teams of trained experts ready to help. Contacting your lender to find out what support is available won’t affect your credit score.”

The report also reflects a relatively low number of possessions, underscoring that seizing properties remains a measure of last resort. A comparison reveals a significant decrease in repossessions from nearly 2,000 in the fourth quarter of 2019, pre-pandemic, to 1,040 in Q4 2023, illustrating a cautious and supportive approach by lenders in addressing the challenges faced by mortgage holders.