In the third quarter of the year, there were 74,850 homeowner mortgages in arrears of 2.5% or more of the outstanding balance, a 5% increase on the same period last year. 

Of those, 24,860 mortgages were in significant arrears of 10% or more of the outstanding balance. 

The payment holiday granted to borrowers due to the pandemic helped those in early arrears – falling less than 5% behind payments – to catch up with commitments resulting in a 5% decline in the number of borrowers in debt. 

As of October, 140,000 borrowers were still on a mortgage payment holiday. 

Meanwhile, there was an 8% increase in borrowers who were behind payments by at least 7.5% 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. 

Buy-to-let arrears

There were 5,400 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the Q3, a 19% 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% 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% 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.