Jump in mortgage arrears and homes being repossessed

- Advertisement -

The number of homes being repossessed and homeowners in arrears jumped in the first quarter of this year, according to figures from a trade association.

There was a 50% increase in the number of homeowner mortgaged properties being repossessed in the first quarter of 2023, compared with the previous three months, UK Finance said.

Some 750 homeowner mortgaged properties were taken into possession in the first quarter of 2023.

UK Finance said the increase in repossessions is from a very low base, as cases make their way through the courts.

The number of buy-to-let homes being repossessed also increased.

In a further sign of borrowers struggling, the number of homeowners in arrears also ticked upwards.

There were 76,630 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2023, 2% greater than in the previous quarter.

Within the total, 28,180 mortgages were in the most severe arrears band of 10% or more of the outstanding balance. This was a 1% decrease compared with the previous quarter.

There were also 27,700 homeowner mortgages in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance. This was 5% higher than the previous quarter.

Meanwhile, 7,030 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance in the first quarter of 2023, 16% greater than in the previous quarter.

Many homeowners on fixed-rate mortgages are yet to feel the impact of rate hikes filtering through to their home loans.

Previous figures from UK Finance indicate that homeowners whose mortgages directly track the base rate face a total average annual bill hike of around £5,000, following the series of rate hikes, which have taken the base rate from 0.1% to 4.5%.

The Resolution Foundation recently said that richer households, which are more likely to be mortgaged than poorer homes and tend to have more expensive properties, will face the majority of the rise in mortgage costs.

But the foundation predicted that the scale of the living standards shock will be particularly high for those low and middle-income households who are affected.

Younger home-owning families, who tend to have lower incomes than older households and higher mortgages relative to incomes, will also face a sharp living standards hit, the Resolution Foundation said previously.

Research released by the Financial Conduct Authority (FCA) this week indicated that around one in five adults were finding bills and credit commitments a heavy burden by the start of this year.

The FCA research found that 29% of adults with a mortgage and 34% of renters had experienced payment increases in the six months to January this year.

UK Inflation rate
(PA Graphics)

“However, the increase is small and the outright level is still lower than previous years.

“While the number of repossessions increased, it’s important to note that this is from a very low base as historic cases make their way through the courts.

“The total number of possessions remains significantly below the levels seen prior to the pandemic.

“As the cost-of-living challenges persist, customers may find themselves struggling with a range of bills including their mortgage. Lenders stand ready to help anyone who might be concerned about their repayments.”

Writing in a blog on UK Finance’s website, Sonia Fernandes, principal, mortgages at UK Finance, said the increase in the number of households in early arrears “should not be a cause for panic”.

She said: “Lenders are proactively supporting borrowers who are worried about their finances.

“Over the last year, lenders have helped nearly 200,000 borrowers who cannot meet their full mortgage payment by providing tailored forbearance.”

She continued: “Tailored forbearance means that a lender will offer support focused on the borrower’s individual circumstances and what they can afford to pay.

“Examples of the support available includes a period of reduced payments, a period of zero payments or a temporary switch to interest-only. Importantly borrowers will never be asked to pay more than they can afford.

“There is no need for a borrower to wait until they have missed a payment to seek help. Over the last year, lenders proactively supported two million borrowers with financial difficulty assistance, including budgeting support, access to debt advice and breathing space.”

Samuel Mather-Holgate, of Swindon in Wiltshire-based advisory firm Mather & Murray Financial, said: “Repossession is the final stage of a long process, and these rose by 50% over the quarter. This unfortunately means there is more bad news to come.”

Justin Moy, founder at Chelmsford in Essex-based mortgage broker EHF Mortgages, said: “This data does not make good reading. Some of this will be directly associated with higher mortgage rates, some will be the higher living costs that we are having to deal with.”

Bob Singh, of Uxbridge in London-based mortgage broker Chess Mortgages, said: “The message here for those struggling is to take advice and communicate with lenders, who are very reasonable under these circumstances and repossession is often a last resort for them.”

- Advertisement -
- Advertisement -

Latest Stories

- Advertisement -

UK News

- Advertisement -
- Advertisement -

Read the latest free supplements

Read the Town Crier, Le Rocher and a whole host of other subjects like mortgage advice, business, cycling, travel and property.