The number of people in arrears has increased by 25 per cent over 2023, research from UK Finance has revealed.
The research, Mortgage Arrears and Possessions, found there were 93,680 homeowner mortgages in arrears of 2.5 per cent or more in the final quarter of last year.
This was an increase on the 75,170 homeowner mortgages in the same level of arrears recorded at the end of 2022.
AJ Bell director of personal finance, Laura Suter, said: “The number of people in arrears on their mortgage has jumped 25 per cent in the past year, as homeowners feel the pressure from 14 consecutive interest rate increases.”
Some 35,940 homeowner mortgages were in the lightest arrears band, representing between 2.5 and 5 per cent of the outstanding balance.
This was 5 per cent greater than in the previous quarter.
Suter added her predictions for the future, saying that despite mortgage rates falling so far this year, it’s clear arrears will keep rising.
“While a drop in mortgage rates is welcome, anyone coming to the end of a two and five-year fixed-rate deal will find they are facing higher costs - which understandably will be unaffordable for many,” she said.
Buy-to-let
The buy-to-let sector also saw growth in arrears.
The data showed within the 93,680 mortgages in arrears, 13,570 buy-to-let mortgages were in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2023.
This was 18 per cent greater than in the previous quarter.
Additionally, UK Finance reported there were 6,800 buy-to-let mortgages in the lightest arrears band, 8 per cent more than Q3 2023.
This meant mortgages in arrears accounted for 0.69 per cent of all buy-to-let mortgages outstanding in the last quarter of the year.
Suter pointed out that the figure for buy-to-let mortgages in arrears jumped by 124 per cent at the end of 2023, when compared with a year earlier.
“While landlords have enjoyed a rental boom in the past couple of years, many have found their mortgage costs are higher than the rent they’re receiving,” she added.
“On top of that, many are finding it impossible to keep up with mortgage payments if they have any periods where the property is vacant.”
It was also reported that 540 homeowner mortgaged properties were taken into possession in the fourth quarter of 2023, 14 per cent fewer than in the previous quarter.
In contrast, the number of buy-to-let mortgaged properties taken into possession rose by 11 per cent compared to the previous quarter, increasing to 500.
tom.dunstan@ft.com
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