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Mortgage arrears and possessions low despite economic uncertainty

Written by: Shekina Tuahene
The number of homeowner and buy-to-let mortgages in arrears in the first quarter of the year has fallen, as has the number of repossessed homeowner mortgaged properties, figures from UK Finance show.

Homeowner and buy-to-let borrowers with arrears of 2.5 per cent or more of the outstanding balance in Q1 2020 both fell by six per cent year-on-year.  

This represents 72,380 homeowner mortgages and 4,420 buy-to-let mortgages which are in arrears of 2.5 per cent or more. 

When compared to the last quarter of 2019, there were marginal increases in the number of borrowers in arrears. Homeowners with mortgage arrears of 2.5 per cent or more increased two per cent while buy-to-let arrears rose one per cent. 

Callum Bilbe, analyst of data and research at UK Finance, said the majority of new arrears were in March before the payment holiday scheme, indicating the early effects of the Covid-19 crisis. 

Significant arrears 

For those with arrears of 10 per cent or more of the outstanding balance, there were 22,050 homeowner mortgages in this category amounting to six per cent fewer than the same period last year. 

Quarterly, this was a one per cent increase. 

As for buy-to-let borrowers, there were 1,170 with significant arrears of 10 per cent or more of the outstanding balance. This was down three per cent year-on-year. 

Quarterly, this was also a one per cent rise. UK Finance said the level of arrears seen in the first quarter remained “low by historical comparisons”.

Repossessions down 

Some 1,070 homeowner mortgaged properties were taken into possession in the first quarter of 2020, 23 per cent fewer than in the same period last year 

Further, 640 buy-to-let mortgaged properties were taken into possession in the first quarter of 2020, eight per cent more than in the same quarter of the previous year. 

On a quarterly basis, homeowner repossessions saw a 20 per cent drop while buy-to-let repossessions fell by three per cent in Q1. 

Continued support needed

Dave Miller, client account manager at Spicerhaart Corporate Sales, said: “Most of those borrowers are unlikely to be in a better position to address those arrears after the payment holiday is ended, and both lenders and the government need to think through what the best approach is to helping people in that situation.” 

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “Even with interest rates so low, which should mean mortgage payments are relatively affordable, the pandemic has resulted in much economic uncertainty.  

“Thankfully, lenders continue to show forbearance and flexibility towards those borrowers who are struggling with their mortgages, with many homeowners being granted payment holidays.”  

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