Mortgage arrears and possessions fall again during second quarter

The number of mortgages in arrears has declined in the second quarter (Q2) of this year, being the lowest level since 1994.

The number of mortgages in arrears of 2.5% or more of the outstanding balance declined to 88,200 in the second quarter of this year. This total was 5% lower than in the first quarter (92,600) and accounted for 0.8% of more than 11 million mortgages outstanding in the UK.

The second quarter also saw a fall in the number of mortgages across all arrears bands, including those with the highest levels of arrears.

In the same period, the number of mortgages with arrears of 10% or more of the outstanding balance totalled 25,000, down 5% from 26,500 in the previous quarter. This brought an end to a period of five successive quarters in which this figure had edged upwards from 23,400 in the first quarter of 2016.

Paul Smee, head of mortgages at UK Finance, commented: “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.”

The number of properties taken into possession also declined in Q2 from 1,900 to 1,800 (accounting for 0.02% of all mortgages). The total was the same as in Q1 2016, and is the lowest figure since quarterly data was first published in 2008.

Similar to a trend that has become established in recent data, the rate of buy-to-let arrears was lower than arrears in the sector of occupied owners. However, the buy-to-let possession rate was higher. It is speculated that lenders showed a high level of restraint to owner-occupiers to help them overcome any financial difficulties and stay in their homes wherever possible.

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