Finance

UK Finance: Mortgage arrears and possessions at 24 year all time low

The latest data and analysis from UK Finance has shown that, across the UK, mortgage arrears and possessions continue to remain historically low.

Warren Lewis
|
9th August 2018
mortgage 5

The latest data and analysis from UK Finance has shown that, across the UK, mortgage arrears and possessions continue to remain historically low.

The data, which covers the second quarter of 2018, revealed that there were 76,740 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2018, 8% fewer than in the same quarter of the previous year.

Within the total, there were 23,190 homeowner mortgages with arrears representing 10% or more of the outstanding balance. This was 4% fewer than in the same quarter of the previous year.

There were 4,440 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2018, 6 per cent fewer than in the same quarter of the previous year. Within the total, there were 1,080 buy-to-let mortgages with arrears representing 10 per cent or more of the outstanding balance. This was 2% greater than in the same quarter of the previous year.

1,060 homeowner mortgaged properties were taken into possession in the second quarter of 2018, 5 per cent fewer than in the same quarter of the previous year. 520 buy-to-let mortgaged properties were taken into possession in the second quarter of 2018, 24 per cent fewer than in the same quarter of the previous year.

Jackie Bennett, Director of Mortgages at UK Finance comments: “Arrears and possessions are at an all-time historic low since we first started collecting this data over 24 years ago.

While this is positive, last week's base rate rise coupled with the disappointing uptake of the Support for Mortgage Interest (SMI) loan could see arrears creeping up in the coming months.

With well over 90 per cent of new loans taken out at fixed rates, most recent borrowers will see no immediate impact from the Bank rate increase. However, anyone with concerns about managing their mortgage should contact their lender to discuss the advice and support available. Repossession is always a last resort.”

Ross Boyd, founder of Dashly.com, commented: "It's encouraging that arrears and possessions are down compared to a year ago but as interest rates gradually increase, households will come under ever more pressure.

With the interest rate up-cycle now seemingly underway, it has never been more important for households to be on top of their mortgage finances. Thankfully, many homeowners have remortgaged onto fixed rates to protect themselves against rate rises in the short to medium-term.

With Brexit uncertainty likely to crescendo during the next couple of years, and rates potentially edging further upwards, the pressure on household finances will almost certainly increase. The jobs market is strong for the time being, and inflation not significantly above target, but conditions could deteriorate rapidly in the event of a chaotic withdrawal from the EU, with both businesses and consumers the victims.

Political and economic storm clouds are gathering and UK homeowners need to prepare as best they can."

Jonathan Harris, director of mortgage broker Anderson Harris, says: "Mortgage arrears are at a record low, which is encouraging, but there is no room for complacency, particularly with interest rates rising this month.

While possessions may be declining, this can change and borrowers need to be prepared. Many are opting for fixed-rate mortgages to help with budgeting, which makes a lot of sense, particularly if there are further rate rises. Despite last week’s rate hike, fixed-rate mortgages remain competitively priced, with five-year fixes still available at less than 2%.

We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty. It is vital that borrowers keep their lender in the loop if they are struggling to pay their mortgage. Part of the reason why arrears levels are low is that lenders are being flexible and showing forbearance but it is much easier and less stressful to come up with solutions early on than further down the line when options may be much more limited."

Mark Pilling, Spicerhaart Corporate Sales managing director, says “As much as arrears remain historically low, there is the danger that anyone on a tracker or SVR mortgage would be looking at affordability now that interest rates have increased. The governor of the Bank of England has already suggested that this will not be the last rate rise this year, which is likely to put more pressure on some people.

UK Finance recently announced that lenders have signed up to agree common standards, which will help existing borrowers on reversion rates who, because of stricter affordability criteria, are ineligible to move to an alternative product. However, there are currently over 150,000 mortgage prisoners, but these proposals will only help 10,000 people initially, which is a drop in the ocean.

For the other 140,000 there is a real threat that, as wages stagnate and they remain on high interest rates, they will fall into arrears. Although it is good that some progress has been made, it is important for lenders, and mortgage owners, to now be looking at all the cases on their books and finding ways to help their clients out of this situation.”

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