The number of mortgage arrears and home possessions in the UK dropped yet again in the second quarter (Q2) of this year, according to the latest Council of Mortgage Lenders (CML)/UK Finance data.
The amount of mortgages in arrears of 2.5% or more of the outstanding balance fell to 88,200 in Q2 – the lowest level since at least 1994, when this run of data began. This is 5% lower than in Q1 (92,600) and amounted to just 0.8% of the 11m+ mortgages currently outstanding in the UK.
Q2 also saw a decline in the number of mortgages across all arrears bands, including those with the highest levels of arrears. In the same period, the amount of mortgages with arrears of 10% or more of the outstanding balance totalled 25,200 – down by 5% from 26,500 in Q1. This brought a welcome end to a period of five consecutive quarters in which this figure had edged upwards, from 23,400 in Q1 2016.
The number of homes taken into possession also decreased in Q2, from 1,900 to 1,800 (accounting for 0.02% of all mortgages). This total was the same as in Q4 last year and is the lowest figure since quarterly data was first published in 2008.
In line with a trend that has become established in recent data, the rate of buy-to-let arrears was lower than arrears in the owner-occupier 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 when possible.
The Head of Mortgages at UK Finance, Paul Smee, comments on these latest figures: “These figures show that the overwhelming majority of borrowers are managing their mortgage payments successfully, and many of those who have experienced some difficulty in the past are able to recover their financial position. The recent improvement in the number of mortgages with high levels of arrears is particularly welcome.
“Borrowers are being helped by low interest rates, but mortgage costs are certain to rise at some stage. It is important therefore for customers to plan ahead and consider how their finances would be affected in those circumstances. As ever, lenders will continue to help borrowers resolve any financial difficulty if possible, so customers should not hesitate to contact their lender if they anticipate any payment problems.”
Remember that the Bank of England recently held interest rates at 0.25%, but they are expected to go up over the next few years, albeit gradually.