Growing Number of Homeowners and Landlords Falling into Mortgage Arrears
New figures from UK Finance, a trade association, reveal that an increasing number of homeowners and landlords are falling into arrears with their mortgages. In the second quarter of 2023, there were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance, which is a 7% increase compared to the previous three-month period. Additionally, there were nearly 9,000 buy-to-let mortgages in arrears of 2.5% or more, a 28% increase from the previous quarter.
UK Finance attributes this rise in arrears to higher interest rates and the rising cost of living, which continue to put pressure on households. However, the trade association emphasizes that the overall numbers of homeowners and landlords in arrears remain low, with less than 1% of homeowners and less than half a percent of landlords behind on their payments.
Despite the relatively low numbers, UK Finance warns that home repossessions are likely to increase this year. In the second quarter of 2023, 440 buy-to-let mortgaged properties were repossessed, a 7% increase from the previous quarter. However, the number of homeowner mortgaged properties that were repossessed decreased by 19% to 610.
Impact on the Rental Market
Myron Jobson, senior personal finance analyst at interactive investor, expresses concern over the uptick in buy-to-let arrears, stating that it is a worrying sign for the rental market. Landlords who are struggling financially due to mortgage arrears may attempt to offset their financial difficulties by raising the rent for their tenants.
Rise in Mortgage Repossession Claims
Separate figures from the Ministry of Justice reveal a 15% increase in mortgage repossession claims between April and June compared to the same period the previous year. Across the county courts of England and Wales, there were 3,986 mortgage repossession claims. However, these figures are still significantly lower than pre-COVID levels and the highs reached in 2009.
There were also 22,537 landlord repossession claims, representing a 24% increase compared to the previous year.
A government spokesperson acknowledges that home repossession is always a last resort and that only a minority of evictions end up in court. They highlight that overall repossessions remain below pre-pandemic levels and that measures are in place to provide financial support, with an average of £3,300 per household.
As the cost of living continues to rise and interest rates remain high, it is crucial for homeowners and landlords to carefully manage their mortgage payments to avoid falling into arrears. Seeking financial advice and exploring available support options can help individuals navigate these challenging times.