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Mortgage arrears hit new low but north-south divide growing

Written by: Owain Thomas
Mortgage arrears and repossessions continued to fall in the second quarter of 2017, with arrears hitting a new low during the period.

Just 88,200 mortgages had arrears of 2.5% or more between April and June, this accounted for 0.8% of the more than 11 million mortgages outstanding in the UK.

However, commentators note the data shows a north-south divide is opening-up.

According to the data from UK Finance, the number of UK mortgages in arrears was at its lowest level since at least 1994 when it began collating the figures.

This decline was not limited to those with the smallest debts as all bands of arrears saw a drop.

The fall in the number of mortgages with arrears of 10% or more of the outstanding balance, was especially welcomed by UK Finance.

These totalled 25,200 customers, down 5% from 26,500 in the preceding quarter.

Repossessions down

Repossessions also declined in the second quarter from 1,900 to 1,800 (accounting for 0.02% of all mortgages).

The total was the same as in the final quarter of last year, and is the lowest figure since quarterly data was first published in 2008.

UK Finance head of mortgages, Paul Smee, noted that the improvement in the number of mortgages with high levels of arrears was particularly welcome.

“Borrowers are being helped by low interest rates, but mortgage costs are certain to rise at some stage,” he said.

“It is important therefore for customers to plan ahead and consider how their finances would be affected in those circumstances.”

In line with the recently established trend, the rate of buy-to-let arrears was lower than arrears in the owner-occupied sector, although the buy-to-let possession rate was higher.

This is because lenders extend a high level of forbearance to owner-occupiers to help them overcome any period of financial difficulty and stay in their homes wherever possible.

North-south divide

Spicerhaart corporate sales managing director, Mark Pilling, welcomed the figures but warned there was a worrying north-south divide building.

“What the headlines don’t show is the regional differences,” he said.

“Although there were no repossessions recorded in 93 local authorities, the further north we go the more repossessions we see.

The percentage as a whole is falling, but it is in the areas where house prices, and therefore mortgage lending, is lowest that there are more repossessions, highlighting again the north-south divide when it comes to wages and affordability.

He added: “This is a trend that we have seen for a while, and one that has no easy fix while uncertainty remains and real wages continue to fall as inflation rises.”

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