Homeowner mortgage arrears remained at historically low levels in Q3, while buy-to-let arrears rose slightly from a low base, figures from UK Finance has shown.
In the third quarter of the year, there were 74,850 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance, a five per cent increase on the same period last year.
Of those, 24,860 mortgages were in significant arrears of 10 per cent or more of the outstanding balance.
The payment holiday granted to borrowers due to the pandemic helped those in early arrears – falling less than five per cent behind payments – to catch up with commitments resulting in a five per cent decline in the number of borrowers in debt.
As of October, just 140,000 borrowers were still on a mortgage payment holiday.
Meanwhile, there was an eight per cent increase in borrowers who were behind payments by at least 7.5 per cent of the outstanding balance, showing a rise in those who were missing payments for longer periods.
Overall, UK Finance said the levels of homeowner arrears this year were historically low compared to the last three years.
There were 5,400 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the Q3, a 19 per cent rise on last year.
However, with the number of buy-to-let arrears staying below 5,000 for the last three years, this increase is coming from a low base and numbers were still lower than previous years.
Of the indebted buy-to-let mortgages, 1,350 were in significant arrears of 10 per cent or more of the outstanding balance.
Due to the ban on involuntary repossessions because of the pandemic, there were just 160 homeowner and 230 buy-to-let possessions during the quarter, an annual decline of 88 and 71 per cent respectively.
Stifled by borrower support
Jeremy Leaf, estate agent and a former RICS residential chairman, said: “Mortgage arrears and possessions are always a key indicator of market strength as many will not be activated unless lenders believe there is a good chance of selling.
“Over the past year or so, lenders have been reluctant to enforce proceedings, but mortgage holidays won’t last indefinitely and particularly if debts can’t be serviced.”
“As a result, we are likely to see an increase in possessions and for that matter arrears as government support falls away, which will inevitably have an impact on housing supply and will help to keep rising prices in check,” he added.
Shekina is a reporter at Mortgage Solutions. She has over two years experience in the B2B publishing market, with previous industries including the pet, funeral, hospitality, retail and jewellery trades.
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